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PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
GENERAL AUTOMATION, INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and O-11.
Title of each class of securities to which transaction applies:
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Aggregate number of securities to which transaction applies:
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Per unit prices or other underlying value of transaction computed pursuant
to Exchange Act Rule O-11 (Set for the amount on which the filing fee is
calculated and state how it was determined):
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Proposed maximum aggregate value of transaction:
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Total fee paid:
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[ ] Fee paid previously with preliminary materials.
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GENERAL AUTOMATION, INC.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 29, 2000
TO ALL STOCKHOLDERS OF GENERAL AUTOMATION, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of
GENERAL AUTOMATION, INC., a Delaware corporation (the "Company"), will be held
at the offices of the Company, 17731 Mitchell North, Irvine, California 92614,
on December 29, 2000 at 10:00 A.M. Pacific Time, for the following purposes:
1. To approve the sale of the Company's service business unit;
2. To authorize a name change of the Company to GA eXpress, Inc.;
3. To increase the number of authorized shares of common stock of the
Company from 30,000,000 to 50,000,000;
4. To increase the number of shares reserved for issuance under the
Company's 1999 Stock Option Plan from 1,000,000 to 2,500,000; and
5. To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
Only stockholders of record at the close of business on November 20,
2000, are entitled to notice of and to vote at the Special Meeting or any
adjournments thereof.
By Order of the Board of Directors,
/s/ RICHARD H. NANCE
-----------------------------------
Richard H. Nance, Vice President
Finance, Chief Financial Officer,
and Secretary
Irvine, California
November 29, 2000
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE PROMPTLY COMPLETE,
SIGN AND DATE THE ENCLOSED PROXY, AND RETURN IT IN THE ENCLOSED ENVELOPE. THE
PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED, AND STOCKHOLDERS EXECUTING
PROXIES MAY ATTEND THE MEETING AND VOTE IN PERSON, SHOULD THEY SO DESIRE.
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GENERAL AUTOMATION, INC.
17731 MITCHELL NORTH
IRVINE, CALIFORNIA 92614
----------------------
PROXY STATEMENT
----------------------
GENERAL INFORMATION
The accompanying proxy is solicited by the Board of Directors of
General Automation, Inc. (the "Company") for a Special Meeting of Stockholders
of the Company to be held at the offices of the Company, 17731 Mitchell North,
Irvine, California 92614 on December 29, 2000 at 10:00 A.M. Pacific time. All
proxies duly executed and received will be voted on all matters presented at the
Special Meeting in accordance with the instructions given by such proxies. In
the absence of specific instructions, proxies so received will be voted "for"
approval of the sale of the Company's service business unit; "for" authorization
to change the name of the Company to GA eXpress, Inc; "for" the increase in the
number of authorized shares of common stock of the Company from 30,000,000 to
50,000,000; and "for" the authorization to increase the number of shares
reserved for issuance under the Company's Stock Option Plan from 1,000,000 to
2,500,000. The Board of Directors does not know of any other matters that may
be brought before the Special Meeting. In the event that any other matter should
come before the Special Meeting, the persons named in the enclosed proxy will
have discretionary authority to vote all proxies not marked to the contrary with
respect to such matter in accordance with their best judgement. The proxy may be
revoked at any time before being voted. The Company will pay the entire expense
of soliciting the proxies, which solicitation will be by use of the mails. This
Proxy Statement is being mailed to stockholders on or about December 8, 2000.
Only holders of shares of Common Stock of record at the close of
business on November 20, 2000 will be entitled to notice of and to vote at the
Special Meeting and at all adjournments thereof. As of the close of business on
November 20, 2000, the Company had 14,721,265 shares of Common Stock
outstanding.
At the Special Meeting, the vote of a majority of the shares of common
stock outstanding is required to approve the items listed above and discussed
herein.
Shares represented by proxies which are marked "abstained" or which are
marked to deny discretionary authority will only be counted for determining the
presence of a quorum. In addition, where brokers are prohibited from exercising
discretionary authority for beneficial owners who have not provided voting
instructions (commonly referred to as "broker non-votes"), those shares will not
be included in the vote totals.
A list of the stockholders entitled to vote at the Special Meeting will
be available at the Company's office, 17731 Mitchell North, Irvine, California
92614, for a period of ten days prior to the Special Meeting for examination by
any stockholder.
Officers and Directors of the Company beneficially own approximately
6.2% of the outstanding shares of Common Stock. See "Security Ownership of
Management and Principal Stockholders." Accordingly, approval of the aforesaid
matters is not assured and your vote is required in order for the Company to
take these actions.
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AUTHORIZATION FOR SALE OF SERVICE BUSINESS
(PROPOSAL #1)
On November 13, 2000, the Board of Directors approved and the Company
signed a letter of intent with a private investor group to purchase the
Company's hardware services business, which accounted for approximately $6
million in revenue the last fiscal year. Over the last fiscal year, the Company
has focused on the business-to-business market. As the hardware services
business is not in keeping with the Company's strategic focus and in that it is
a business that has consistently been experiencing revenue attrition in the 20%
range over the past three years, management and the Board of Directors feel that
the sale will be beneficial to the Company, employees, and existing customers.
The buyers will be investing in the business with their primary focus on growing
the hardware services business by improving and broadening the services provided
to the customers.
The Company is anticipating a gain on the sale of this business in
addition to further reduction of debt and liabilities allowing the Company to
continue its focus on the ongoing e-business software strategy.
The sale of the hardware services business will be treated as an asset
purchase where a private investor group will pay cash at closing and in addition
the Company will receive a percentage of the annual value of any added gross
revenue generated over the subsequent twelve months.
Currently, there are 60 employees in the hardware services business.
The terms of the agreement state that the Buyer will make offers to Service
Business employees as selected by buyer at their existing salaries and
comparable benefit plan.
All of the Company's existing service contracts will be honored by the
new owners.
The terms of the sale are as follows:
THE BUYER: GA Services, LLC, a newly formed limited liability company
("Buyer"), will be purchasing the Company's hardware services business (the
"Service Business"). GA Services, LLC is located at 10 Vista de San Clemente,
Laguna Beach, CA 92651. The managers of GA Services, LLC are Charles Strauch and
George Harris.
ASSETS BEING ACQUIRED: Buyer will acquire the assets of the Service
Business consisting of the following for the following prices:
(a) Trade Names: The names "GA Services" and "General Automation
Services."
(b) Contracts and Deferred Liabilities: Current hardware and
operating system contracts and associated deferred liabilities in effect at the
time of closing subject to Buyer's review and acceptance of the deferred
liabilities prior to the close.
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(c) Accounts Receivable: All of the accounts receivable balance as
of the date of closing to be paid for in cash at closing at a value of 90% of
the value of those accounts receivable which have an aging between 0 and 91
days. Buyer reserves the right to adjust accounts receivable value actually paid
based on the Buyer's review of the accounts receivable aging existing at the
date of close.
(d) Furniture, fixtures, and equipment: All of the furniture,
fixtures, equipment and leasehold improvements to be paid for in cash at closing
at a value of $40,000.
(e) Inventory: All of the inventory as of the date of closing to be
paid for in cash at closing at a value of $800,000 subject to Buyer's review of
the inventory prior to signing the definitive agreement to determine that the
inventory is sufficient to support future business.
(f) Future Revenues: Buyer agrees to pay Seller 10% (up to a maximum
of $300,000) of "revenue" in excess of $7.1 million that is generated by Buyer
during Calendar 2001 to be paid in cash to Seller no later than April 30, 2002.
"Revenue" shall mean that revenue generated between the date of close and
December 31, 2001, which is collected by Buyer before March 31, 2002.
ADDITIONAL TERMS OF ACQUISITION. The following conditions are
additional material terms of the sale:
(a) Buyer will make offers to Service Business employees as selected
by Buyer at existing salaries and comparable benefit plan. Offers will be on "at
will" basis. Seller will pay employees for all accrued salary and vacation time
at Closing.
(b) Seller shall use its best efforts to execute the Olen Commercial
Realty Corp. option to renew for two years for the two existing leases on the
Irvine facility known as Building 2. If Seller is successful, Buyer will assume
the Olen lease and shall assume the existing lease on the Bohemia facility. If
Seller is not successful in renewing its Building 2 lease, then Buyer will
negotiate a new lease for Building 2. Buyer will not assume any other leases but
will assume only month to month rental obligations that are mutually agreed upon
by the Parties for any other Service Business storage/office facilities.
(c) Buyer shall assume all Seller's obligations under the Service
Business contracts with Seller's Customers subject to Buyer's review of those
obligations.
(d) Buyer reserves the right to adjust the purchase price relative
to pre-paid Service Business obligations that Buyer considers to be excessive.
(e) Seller and Tom Wedrick (NCE) will enter into an agreement that
ensures that NCE will not compete with Seller or Buyer for Seller's customers or
employees.
(f) Seller will assure to Buyer's satisfaction no adverse results to
Buyer should Seller enter into a bankruptcy proceeding following the Closing.
(g) Seller will provide transition support to Buyer after Closing
for telephone service, information systems (including e-mail), and accounting
(including billing and payroll).
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(h) Seller will allow Buyer the exclusive use of the names "GA
Services" or "General Automation Services."
(i) Seller and Buyer will enter into agreements with Seller's
existing Service Business related vendors to ensure no interruption of parts and
services to the Buyer due in any way to the relationship which exists now or in
the past between Seller and such vendors.
(j) Seller and Buyer will agree to establish upon Closing an escrow
account amounting to a minimum of $200,000 and a maximum of $240,000 for a
period of 12 months to cover unknown/undisclosed liabilities.
The definitive agreement provides for mutual indemnification. A copy of
the proposed definitive agreement is included herewith as Exhibit A.
The vote of a majority of the shares of Common Stock represented at the
Special Meeting is required to authorize the sale of the Company's service
business unit. Proxies not marked to the contrary will be voted for the
authorization of the sale of the Company's service business unit.
THE BOARD RECOMMENDS A VOTE "FOR" THE AUTHORIZATION OF THE SALE OF THE
COMPANY'S SERVICE BUSINESS UNIT.
AUTHORIZATION OF NAME CHANGE
(PROPOSAL #2)
The Company has been utilizing the name GA eXpress as a dba over the
last year to more precisely describe the Company's new business strategy of
focusing on the business-to-business (also known as "B2B") market. The Board of
Directors would like to formally change the Company's name from General
Automation, Inc. to GA eXpress, Inc.
The vote of a majority of the shares of Common Stock represented at the
Special Meeting is required to authorize the name change. Proxies not marked to
the contrary will be voted for the authorization of the name change.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NAME CHANGE.
APPROVAL OF INCREASE IN AUTHORIZED SHARES OF COMMON STOCK
(PROPOSAL #3)
The Company currently has 30,000,000 shares of common stock authorized
and approximately 13,967,840 shares issued and outstanding. The Board of
Directors has proposed that the Company increase its authorized shares from
30,000,000 to 50,000,000. By increasing the authorized shares, the Company has
merely increased the number of shares that it MAY issue in the future. The Board
of Directors does not believe that the Company will require the entire number of
shares to achieve its business objectives, however, the Company wants to assure
that the authorized capital is sufficient to implement our future acquisition
and fund raising activities.
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The vote of a majority of the shares of Common Stock represented at the
Special Meeting is required to authorize the increase in authorized shares of
common stock of the Company. Proxies not marked to the contrary will be voted
for the authorization of the increase in authorized shares of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AUTHORIZATION OF THE
INCREASE IN AUTHORIZED SHARES OF COMMON STOCK OF THE COMPANY.
AUTHORIZATION OF INCREASE IN NUMBER OF SHARES
RESERVED FOR ISSUANCE UNDER THE COMPANY'S
1999 STOCK OPTION PLAN
(PROPOSAL #4)
In 1999, the Company created a Stock Option Plan to award compensation
primarily in the form of qualified and nonqualified stock options to key
employees, directors, and consultants. The 1999 Stock Option Plan reserved
1,000,000 shares for issuance as options under the Plan. To date, the Company
has issued 953,333 options to key employees, directors, and consultants. The
Board of Directors believes it to be in the best interests of the Company to
increase the number of shares reserved under the 1999 Stock Option Plan from
1,000,0000 to 2,500,000 so that the Company will have options available for
issuance over the next few years. The increase in the number of shares reserved
for issuance under the 1999 Stock Option Plan will allow the Board to attract
and compensate key employees, directors, and consultants without using cash.
The vote of a majority of the shares of Common Stock represented at the
Special Meeting is required to authorize the increase in shares reserved for
issuance under the Company's 1999 Stock Option Plan. Proxies not marked to the
contrary will be voted for the authorization of the increase in shares reserved
for issuance under the Company's 1999 Stock Option Plan.
THE BOARD RECOMMENDS A VOTE "FOR" THE AUTHORIZATION
OF INCREASE IN THE NUMBER OF SHARES RESERVED FOR ISSUANCE UNDER
THE COMPANY'S 1999 STOCK OPTION PLAN.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS FOR 2000
The rules of the Securities and Exchange Commission permit stockholders
of the Company, after notice to the Company, to present proposals for
stockholder action in the Company's proxy statement where such proposals are
consistent with applicable law, pertain to matters appropriate for stockholder
action, and are not properly omitted by Company action in accordance with the
proxy rules published by the Securities and Exchange Commission. The Company's
2001 annual meeting of stockholders is expected to be held on or about May 1,
2001, and proxy materials in connection with that meeting are expected to be
mailed on or about April 1, 2001. Proposals of stockholders of the Company that
are intended to be presented at the Company's 2000 annual meeting must be
received by the Company no later than December 1, 2000 in order for them to be
included in the proxy statement and form of proxy relating to that meeting.
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COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires that the Company's Officers and Directors, and persons who own
more than ten percent of a registered class of the Company's equity securities,
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Officers, Directors and greater than ten percent
stockholders are required by regulation to furnish to the Company copies of all
Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons the Company believes
that during its 2000 fiscal year, all such filing requirements applicable to its
Officers, Directors, and greater than ten percent beneficial owners were
complied with.
OTHER MATTERS
The Board of Directors of the Company does not intend to present any
business at the Special Meeting other than the matters specifically set forth in
the Proxy Statement and knows of no other business to come before the Special
Meeting. However, on all matters properly brought before the Special Meeting by
the Board or by others, the persons named as proxies in the accompanying proxy
will vote in accordance with their best judgement.
It is important that your shares are represented and voted at the
Special Meeting, whether or not you plan to attend. Accordingly, we respectfully
request that you sign, date, and mail your Proxy in the enclosed envelope as
promptly as possible.
A copy of the Company's Annual Report on Form 10-K for the year ended
September 30, 1999, which has been filed with the SEC pursuant to the Exchange
Act and mailed to all shareholders of record, may be obtained without charge
upon written request to Richard H. Nance, Vice President Finance, Chief
Financial Officer, and Secretary, General Automation, Inc., 17731 Mitchell
North, Irvine, California 92614, or on the Internet at www.sec.gov from the
SEC's EDGAR database.
By Order of the Board of Directors
/s/ RICHARD H. NANCE
--------------------------------
Richard H. Nance, Vice President
Finance, Chief Financial Officer,
and Secretary
Irvine, California
November 29, 2000
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EXHIBIT A
AGREEMENT OF PURCHASE AND SALE
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GENERAL AUTOMATION, INC.
AGREEMENT OF PURCHASE AND SALE
THIS AGREEMENT OF PURCHASE AND SALE (the "Agreement"), dated as of the
27th day of November, 2000, is made by and between General Automation, Inc., a
Delaware corporation (the "Company"), and GA Services, LLC, a California limited
liability company (the "Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Company is engaged in, among other things, the business of
providing support services to computer and telecommunications users through its
GAExpress division with facilities in Bohemia, New York and Irvine, California
(such activities being hereinafter referred to as the "Business"); and
WHEREAS, subject to the terms and conditions of this Agreement, the
Company desires to sell and Purchaser desires to buy certain assets related to
the Business including certain accounts receivable, inventory, furniture and
equipment and certain leasehold improvements all of which are listed on Schedule
I(a) (the "Assets").
NOW, THEREFORE, in consideration of the terms, covenants and conditions
stated herein, the parties hereto agree as follows:
SECTION I
PURCHASE AND SALE OF THE ASSETS
(a) PURCHASE AND SALE OF THE ASSETS; LIABILITIES. Subject to the terms
and conditions of this Agreement and on the basis of the representations,
warranties, covenants and agreements herein contained, the Company hereby sells,
assigns and conveys to the Purchaser, and the Purchaser hereby purchases,
acquires and accepts from the Company, the Assets as listed on Schedule I(a),
free and clear of any mortgages, options, conditions, liens, charges, security
interests, encumbrances, pledges, equities, claims or liabilities (collectively,
"Liens or Encumbrances"). The Assets shall include the financial books and
records, of every kind and nature, real, personal, and mixed, tangible and
intangible, wherever located, of the Company used in or in any way related to
the Business and as further described on Schedule I(a).
(b) ASSUMED OBLIGATIONS. The Purchaser shall not assume and shall have
no responsibility with respect to, any and all liabilities or obligations of the
Company, known or unknown, absolute or contingent, accrued or unaccrued, whether
due or to become due, except for: (i) those liabilities and obligations
specifically set forth on Schedule I(b) hereto and (ii) those liabilities and
executory obligations as expressly set forth in certain assigned contracts (the
"Assigned Contracts"), also set forth on Schedule I(b) (the items being listed
on Schedule I(b) collectively being referred to as the "Assumed Obligations").
Those liabilities and obligations under the Assigned Contracts shall be assumed
by Purchaser only upon effective assignment of such agreements. The Assumed
Obligations shall not include any obligations or liabilities arising out of any
act or omission or default of the Company occurring prior to the Closing (as
defined in Section VI(a)) under any Assigned Contract, regardless of when such
liability or obligation is asserted. The Company represents and warrants that it
is not in default of any Assumed Obligation, and the
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Purchaser shall not be obligated to assume any Assumed Obligation which is in
default as of the Closing Date (as defined in Section VI(a)).
(c) LIABILITIES NOT BEING ASSUMED. Except for the Assumed Obligations,
the Company agrees that Purchaser shall not be obligated to assume or perform
and is not assuming or performing any liabilities or obligations of the Company,
whether known or unknown, fixed or contingent, certain or uncertain (the
"Retained Liabilities"), and the Company shall remain responsible for and shall
indemnify, defend (with counsel reasonably acceptable to Purchaser and paid for
by the Company) and hold harmless Purchaser from and against all Retained
Liabilities, which shall include, but shall not be limited to, the following
obligations or liabilities of the Company:
(i) Any compensation or benefits payable to present or past
employees of the Company incurred prior to the Closing Date, including without
limitation, any liabilities arising under any employee pension or profit sharing
plan or other employee benefit plan and any of the Company's obligations for
vacation, holiday or sick pay;
(ii) All federal, state, local, foreign or other taxes related
to the operation of the Business and incurred prior to the Closing Date and any
tax liability of the Company which is not related to the Business;
(iii) Any Liens or Encumbrances on any of the Assets and all
obligations and liabilities secured thereby;
(iv) All obligations of the Company, either for borrowed money
or incurred in connection with the purchase, lease or acquisition of any assets;
(v) Any accounts or notes payable of the Company;
(vi) Any claims, demands, actions, suits or legal proceedings
that have been asserted or threatened prior to the Closing Date against the
Company, the Business or the Assets or which may be threatened hereafter against
the Assets, the Business or the Purchaser but only to the extent related to (i)
the Company's operation of the Business prior to the Closing Date, or (ii) any
other business or non-business activities of the Company conducted prior hereto
or hereafter, including, but not limited to, those legal actions or other
proceedings set forth in Schedule II(j) hereto; and
(vii) Any obligations under any employment, consulting or
non-competition agreements, whether written or oral, incurred prior to the
Closing Date and that is not set forth in Section I(b) or on Schedule I(b).
(d) Intentionally omitted.
(e) INITIAL PURCHASE PRICE. The purchase price (as may be adjusted, the
"Initial Purchase Price") for the Assets shall be equal to (1) Eight Hundred
Forty Thousand dollars ($840,000), plus (2) ninety percent (90%) of the value of
the Business' Accounts Receivable (as defined in Section II(g)) aged ninety (90)
days or less, subject to adjustment (as provided in subsection (e)(i) below)
after Purchaser's review and acceptance of such Accounts Receivable on the
Closing Date, provided that Purchaser's acceptance is not unreasonably withheld.
At the Closing, Purchaser shall pay to the Company an amount (the "Closing Date
Payment"), equal to the Initial
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Purchase Price, less the Holdback Amount (as defined in Section I(g)) and less
the Adjustment to the Purchase Price (as defined in Section I(h) below). The
Closing Date Payment shall be made by wire transfer of immediately available
funds to an account designated by the Company.
(i) With respect to the purchase price adjustments of the
Accounts Receivable above, such adjustments shall be made if, no later than
December 15, 2000, the Purchaser provides the Company with a list of items
related to the Accounts Receivable, along with the corresponding values for each
item, to be excluded from the Initial Purchase Price. The list shall also
contain the Purchaser's reason for excluding such item from the Initial Purchase
Price.
(f) ADDITIONAL PURCHASE PRICE.
(i) In addition to the amount to be paid to the Company
pursuant to Section I(e) hereof, the Purchaser shall pay the Company, or its
successor in interest, as the case may be, on and subject to the terms of this
Agreement, additional consideration (the "Additional Purchase Price") only if
the Purchaser's gross revenue from the period during the 2001 calendar year, but
not commencing before the Closing (the "Revenue Period"), is in excess of
$7,100,000 (the "Base Revenue"). In the event the Purchaser's gross revenue
during the Revenue Period (the "Actual Revenue") exceeds the Base Revenue, the
Purchaser shall pay the Company an amount equal to ten percent (10%) of the
difference between the Actual Revenue and the Base Revenue; provided, however,
that the maximum Additional Purchase Price payable hereunder shall not exceed
$300,000, subject to reduction pursuant to the provisions of Section I(f)(iv)
below.
(ii) The calculation of Actual Revenue for the Purchaser
during the Revenue Period shall be made net of returns and allowances. The
determination of the amount, if any, to be paid in the form of Additional
Purchase Price shall be made by the Purchaser together with its auditors
regularly employed to audit the books of account and financial statements of
Purchaser, and shall be made in accordance with generally accepted accounting
principles ("GAAP"). The calculations of the Base Revenue and Actual Revenue
shall be made based on funds actually received by the Company and such
calculation shall allow for a maximum of ninety (90) days from the end of the
Revenue Period in which to collect funds for services rendered during the
Revenue Period. All determinations of Purchaser made pursuant to this Section
I(f)(ii) shall be deemed binding and conclusive. Within forty five (45) days of
receiving the Purchaser's calculation of the Actual Revenue the Company shall
either (i) notify the Purchaser in writing of its agreement with such
calculation or (ii) notify the Purchaser of its disagreement with such
calculation and conduct an audit of the Purchaser or review the Purchaser's
books and records with respect to the Actual Revenue within such forty five (45)
day time period. Any audit conducted by the Company shall be at the Company's
sole expense and shall not be binding on the Purchaser unless agreed to by the
Purchaser in writing.
(iii) The Additional Purchase Price shall be paid on or before
the expiration of thirty (30) days following the date upon which the final and
binding determinations are made and agreed to by both parties pursuant to
Section I(f)(ii) above by delivery of a bank cashier's check or wire transfer of
funds to the Company. Subject to the prior exhaustion of the Holdback Amount
pursuant to the terms of Section I(g) below and subject to the limitations set
forth in Section VII(d) below, the Purchaser shall be entitled to reduce and
offset the Additional Purchase Price payable to the Company by the amount of any
unsatisfied claim for Damages by the Purchaser against the Company pursuant to
the provisions of Section VII(a) below.
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(g) PURCHASE PRICE HOLDBACK.
(i) The Purchaser shall withhold not less than $200,000 and no
more than $240,000 of the Initial Purchase Price (the "Holdback Amount") as
collateral to secure the Company's obligations described in Section VII(a)
below, during the period commencing on the Closing Date and terminating on the
date that is twelve (12) months from the Closing Date. On the date that is
twelve (12) months from the Closing Date (or if such date is not a business day,
on the next business day thereafter), the Holdback Amount, less the amount of
any reductions thereto, as provided in Section I(g)(ii) below, if a positive
amount, shall be distributed to the Company, without interest. The Purchaser
shall not be required to segregate or set aside the Holdback Amount. The maximum
Holdback Amount shall be subject to reduction in the event the Company
negotiates arrangements, satisfactory to the Purchaser, with the Company's
vendors and suppliers with respect to obligations owed to such vendors and
suppliers.
(ii) The Holdback Amount is subject to reduction and retention
by Purchaser in satisfaction of any claim for Damages by the Purchaser against
the Company pursuant to the provisions of Section VII(a) below.
(h) ADJUSTMENT TO THE PURCHASE PRICE. In addition to the potential
adjustments set forth in Section 1(e) above, the Initial Purchase Price shall be
subject to downward adjustment relative to certain obligations for services to
be rendered in the future by the Company, and assumed by the Purchaser, for
which the Company has already been paid ("Deferred Obligations"), such
customers, services, and prepayment amount being listed on Schedule I(h). The
value of the obligations related to the Deferred Obligations which the
Purchaser, in its sole discretion, deems to be excessive shall be deducted from
the Initial Purchase Price. Purchaser will notify the Company at least twenty
(20) days prior to Closing Date of the adjustment to the Initial Purchase Price
and the reasons for such adjustment. Company covenants and agrees that after the
date it delivers the Disclosure Schedule (as defined in Section II) as provided
in Section IV(b), it will bill its customers consistent with its past practices
and will promptly notify the Purchaser of any negotiations with respect to
Deferred Obligation agreements. The Company further covenants and agrees that is
shall not enter into any new Deferred Obligation agreements without the written
consent of Purchaser.
(i) ALLOCATION. The Purchase Price for the Assets shall be allocated as
set forth in Schedule I(i) to be attached hereto (the "Purchase Price
Allocation"). Each of the parties, when reporting the transactions consummated
hereunder in their respective Tax Returns (as hereinafter defined), shall
allocate the Purchase Price paid or received, as the case may be, in a manner
that is consistent with the Purchase Price Allocation set forth in Schedule
I(i). Additionally, each of the parties will comply with, and furnish the
information required by Section 1060 of the Internal Revenue Code of 1986, as
amended (the "Code"), and any regulations thereunder.
(j) REMOVAL OF ASSETS BY PURCHASER. The Company shall allow Purchaser
up to one hundred eighty (180) days from the Closing Date in which to transition
the business and remove the Assets from the Company's inventory storage
facilities. Purchaser shall have full access to, and all rights of the Company
relative to such inventory storage facilities.
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SECTION II
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE COMPANY
Except as set for on the disclosure schedule attached hereto as
Schedule II (the "Disclosure Schedule"), the Company hereby represents and
warrants to, and covenants and agrees with, the Purchaser, as of the date of the
Closing that:
(a) ORGANIZATION AND QUALIFICATION. The Company is duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full corporate power and authority to own its properties and to conduct
the business in which it is now engaged. The Company has full corporate power
and authority, and all necessary approvals, permits, licenses and authorizations
to own its properties and to conduct the Business as currently conducted and to
enter into and consummate the transactions contemplated under this Agreement.
(b) AUTHORITY/ENFORCEABILITY. The execution and delivery of this
Agreement by the Company, the performance by the Company of its covenants and
agreements hereunder and the consummation by the Company of the transactions
contemplated hereby have been duly authorized by all necessary corporate
actions. This Agreement constitutes a valid and legally binding obligation of
the Company, enforceable against it in accordance with its terms. The Bill of
Sale (as defined in Section VI(b)(ii)(A)), when executed and delivered at
Closing, and assuming due and proper execution by the Purchaser, constitutes a
valid and legal binding obligation of the Company, enforceable against it in
accordance with its terms.
(c) NO LEGAL BAR; CONFLICTS. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby,
violates any provision of the charter or by-laws of the Company as amended or
any statute, ordinance, regulation, order, judgment or decree of any court or
governmental agency or board, or conflicts with or will result in any breach of
any of the terms of or constitute a default under or result in the termination
of or the creation of any lien pursuant to the terms of any contract or
agreement to which the Company is a party or by which the Company or any of its
assets are bound. No consents, approvals or authorizations of, or filings with,
any governmental authority or any other person or entity are required in
connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, except for required
consents, if any, to assignment of permits, certificates, contracts, leases and
other agreements as set forth in Schedule II(c).
(d) TITLE TO ASSETS. Except as noted on Schedule II(d): (i) the Company
has good and valid title to all Assets and (ii) none of the Assets is subject to
any liens, charges, encumbrances or security interests. None of the Assets (or
uses to which they are put) fails to conform with any applicable agreement, law,
ordinance or regulation in a manner which is likely to be material to the
operations of the Business.
(e) SUFFICIENCY OF ASSETS. The Assets constitute all of the assets,
properties, rights, privileges and interests necessary for the operation of the
Business as it has been owned and operated by the Company.
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(f) PERMITS; COMPLIANCE WITH APPLICABLE LAW.
(i) GENERAL. The Company is not in default under any, and has
complied with all, statutes, ordinances, regulations and laws, orders, judgments
and decrees of any court or governmental entity or agency, relating to the
Business or the Assets as to which a default or failure to comply might result
in a material adverse affect on the Assets or the Business. The Company has no
knowledge of any basis for assertion of any violation of the foregoing or for
any claim for compensation or damages or otherwise arising out of any violation
of the foregoing. The Company has not received any notification of any asserted
present or past failure to comply with any of the foregoing which has not been
satisfactorily responded to in the time period required thereunder.
(ii) PERMITS. Set forth in Schedule II(f) is a complete and
accurate list of all permits, licenses, approvals, franchises, patents,
registered and common law trademarks, service marks, tradenames, copyrights (and
applications for each of the foregoing), notices and authorizations issued by
governmental entities or other regulatory authorities, federal, state or local
(collectively the "Permits"), held by the Company in connection with the
Business. The Permits set forth in Schedule II(f) are all the Permits required
for the conduct of the Business in its present form. All the Permits set forth
in Schedule II(f) are in full force and effect, and the Company has not engaged
in any activity which would cause or permit revocation or suspension of any such
Permit, and no action or proceeding looking to or contemplating the revocation
or suspension of any such Permit is pending or threatened. There are no existing
defaults or events of default or event or state of facts which with notice or
lapse of time or both would constitute a default by the Company under any such
Permit. The Company has no knowledge of any default or claimed or purported or
alleged default or state of facts which with notice or lapse of time or both
would constitute a default on the part of any other party in the performance of
any obligation to be performed or paid by any other party under any Permit set
forth in Schedule II(f). The use by the Company of any proprietary rights
relating to any Permits does not involve any claimed infringement of such Permit
or rights. The consummation of the transactions contemplated hereby will in no
way affect the continuation, validity or effectiveness of the Permits set forth
in Schedule II(f) or require the consent of any person. Except as set forth on
Schedule II(f), the Company is not required to be licensed by, nor is it subject
to the regulation of, any governmental or regulatory body by reason of the
conduct of the Business in its present form.
(g) ACCOUNTS RECEIVABLE. A complete and current aging of all accounts
receivable of the Company as of November 30, 2000 shall be set forth in Schedule
II(g) (the "Accounts Receivable"). There is no contest, claim or right of
set-off contained in any oral or written agreement with any account debtor
relating to the amount or validity of any Account Receivable. . Purchaser shall
review not more than twenty (20) days prior to Closing Date a list of any new
accounts receivable (the "New Accounts")of the Company and the assumption by the
Purchaser of the New Accounts shall be subject to the written acceptance of
Purchaser and added to Schedule II(g).
(h) THE MATERIAL CONTRACTS AND OTHER AGREEMENTS. Schedule II(h)
contains an accurate and complete list of each equipment lease, customer order
(whether written or oral, and regardless of the dollar amount) and all
contracts, agreements, indentures, notes, or other instrument or commitment,
written or oral, to which the Company is a party or is bound and which relates
to any of the Assets or the consummation of the transactions contemplated by
this Agreement and which has an aggregate value to the Company or the other
party thereto in excess of ten thousand dollars ($10,000) (the "Material
Contracts"). Accurate and complete copies of all of the Material Contracts have
been made available by the Company for review by Purchaser prior to the date
hereof. Each of
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the Material Contracts is a valid and binding obligation of the Company and, to
the Company's knowledge, the other parties thereto, enforceable in accordance
with its terms, except as may be affected by bankruptcy, insolvency, moratorium
or similar laws affecting creditors' rights generally and general principles of
equity relating to the availability of equitable remedies.
(i) FINANCIAL INFORMATION. The financial information provided to the
Purchaser hereunder was prepared in accordance with GAAP, consistently applied,
and fairly presents the financial condition of the Company with respect to the
Business at the relevant dates thereof and for the respective periods covered
thereby.
(j) LITIGATION; DISPUTES. Except as set forth in Schedule II(j), there
are no claims, disputes, actions, suits, investigations or proceedings pending
or threatened against the Company, the Business or any of the Assets, which
would hinder the ability of the Company to consummate the transactions
contemplated hereby, and, to the best of the knowledge of the Company, there is
no basis for any such claim, dispute, action, suit, investigation or proceeding.
The Company has no knowledge of any default under any such action, suit or
proceeding. Except as set forth in Schedule II(j), the Company is not in default
in respect of any judgment, order, writ, injunction or decree of any court or of
any federal, state, municipal or other government department, commission,
bureau, agency or instrumentality or any arbitrator.
(k) ENVIRONMENTAL AND SAFETY MATTERS. Except as set forth in Schedule
II(k), the Company has complied with, and the operation of the Business and the
use of the Assets are in compliance with, in all material respects, all federal,
state, regional and local statutes, laws, ordinances, rules, regulations and
orders relating to the protection of human health and safety, natural resources
or the environment, including, but not limited to, air pollution, water
pollution, noise control, on-site or off-site hazardous substance discharge,
disposal or recovery, toxic or hazardous substances, training, information and
warning provisions relating to toxic or hazardous substances, and employee
safety relating to the Business or the Assets (collectively the "Environmental
Laws"); and no notice of violation of any Environmental Laws or of any permit,
license or other authorization relating thereto has been received or threatened
against the Company, and to the best knowledge of the Company, is there any
factual basis for the giving of any such notice. Except as set forth in Schedule
II(k), no underground or above-ground storage tanks or surface impoundments are
located on any of the real properties owned or leased in connection with the
Business and (i) except in compliance with applicable Environmental Laws and any
licenses or permits relating thereto, there has been no generation, use,
treatment, storage, transfer, disposal, release or threatened release in, at,
under, from, to or into, or on such properties of toxic or hazardous substances
during the occupancy thereof by the Company or, to the best knowledge of the
Company, prior to such occupancy, and (ii) in no event has there been any
generation, use, treatment, storage, transfer, disposal, release or threatened
release in, at, under, from, to or into, or on such properties of toxic or
hazardous substances that has resulted in or is reasonably likely to result in a
material adverse effect on the Business or on the Assets. The Company has not
received any notice or claim to the effect that the Company or the Business is
or may be liable to any governmental authority or private party as a result of
the release or threatened release of any toxic or hazardous substances in
connection with the conduct or operation of the Business, and none of the
operations of the Business or the Company and none of the Assets is the subject
of any federal, state or local investigation evaluating whether any remedial
action is needed to respond to a release or a threatened release of any toxic or
hazardous substances at any of the real properties owned or leased in connection
with the Business. For the purposes of this Section II(k), "toxic or hazardous
substances" shall include any material, substance or waste that, because of its
quantity, concentration or physical or chemical characteristics, is deemed
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under any federal, state, local or regional statute, law, ordinance, regulation
or order, or by any governmental agency pursuant thereto, to pose a present or
potential hazard to human health or safety or the environment, including, but
not limited to, (i) any material, waste or substance which is defined as a
"hazardous substance" pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 (42 U.S.C. Section 9601, et seq.), as
amended, and its related state and local counterparts, (ii) asbestos and
asbestos containing materials and polychlorinated biphenyls, and (iii) any
petroleum hydrocarbon including oil, gasoline (refined and unrefined) and their
respective constituents and any wastes associated with the exploration,
development or production of crude oil, natural gas or geothermal energy.
(l) PRODUCT RETURN POLICIES, WARRANTIES AND LIABILITIES. Schedule II(l)
sets forth all Warranties (as hereinafter defined) given or made by the Company
relating to the Business. "Warranties" shall mean all obligations to service,
repair (including, without limitation, to provide fixes to program errors),
replace, credit, refund and other obligations based upon or arising out of
express and implied warranties made or deemed made in connection with the
license or sale of goods or the performance of services by the Company. The
Company has not given or made any Warranties with respect to any products
licensed or sold or services performed by it, except for those set forth in
Schedule II(l). Except as otherwise set forth in Schedule II(l), the Company has
no knowledge of any fact or of the occurrence of any event which might
reasonably form the basis of any present or future claim against the Company,
whether or not fully covered by insurance, for liability on account of
negligence or product liability or on account of any Warranties which would
have, individually or in the aggregate, a material adverse effect on the
Business.
(m) NO BROKER. The Company has not retained or used the services of an
agent, finder or broker in connection with the transactions contemplated by this
Agreement.
(n) INSURANCE. Except as set forth in Schedule II(n) hereto, all of the
insurance policies maintained by the Company in connection with the Business are
now in full force and effect and policies covering the same risks and in
substantially the same amounts have been in full force and effect continuously
through the disposition of the Business. The Company has furnished to Purchaser
a schedule of all insurance claims filed by the Company relating solely and
exclusively to the Business and the disposition thereof. No such claims have
been denied by any of the Company's insurers relating solely and exclusively to
the Business and the Company has not failed to comply with the requirements of
any insurance policies which would provide any insurers the right to deny any
claim relating solely and exclusively to Business.
(o) TAXES AND TAX RETURNS. For purposes of this Agreement, (i) the term
"Tax" or "Taxes" means any federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code Section
59A), customs duties, capital stock, franchise, profits, withholding, social
security, unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not; and (ii) the term "Tax Return"
means any return, declaration, report, claim for refund, or information return
or statement (including, but not limited to, information returns or reports
related to back-up withholding and any payments to third parties) relating to
any Taxes, including any schedule or attachment thereto, and including any
amendment thereof. Purchaser shall have no liability or obligation whatsoever,
and shall not incur any loss, expense or cost, and none of the Assets, or any
assets of the Purchaser, shall be subjected to any Lien or Encumbrance, by
reason of any Taxes arising out of
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(x) the Business as conducted by the Company prior to the consummation of the
sale hereunder of the Assets to the Purchaser or (y) any other operations or
activities of the Company whether conducted prior to the date hereof or
hereafter. The Company further represents and warrants that it is relying solely
on its own accountants and advisors for advice as to the tax consequences to it
of the transactions contemplated hereby.
(p) DISCLOSURE. No representation or warranty made under any Section
hereof and none of the information furnished by the Company set forth herein, in
the exhibits hereto or in any document delivered by the Company to the
Purchaser, or any authorized representative of the Purchaser, pursuant to this
Agreement contains any untrue statement of a material fact or fails to state a
material fact necessary to make the statements herein or therein not misleading.
(q) EMPLOYEES. Schedule II(q) contains a complete and accurate list of
all Company employees related to the Business, along with each employee's annual
compensation.
(r) INTELLECTUAL PROPERTY.
(i) Except as set forth on Schedule II(r)(i), the Company owns
a valid right, title, interest or license in and to the Intellectual Property
(as defined below) including the Third Party Technology used in or necessary
for, the conduct of the Business as presently conducted, including, without
limitation, the right to bring actions for infringement of the Intellectual
Property, other than Third Party Technology, and the conduct of the Business
currently does not conflict with and in the past has not conflicted with
intellectual property rights of others and no person or entity other than the
Company owns any right, title or interest in the Intellectual Property including
any right to manufacture, use, copy, distribute or sublicense any object code or
source code thereof. All Intellectual Property used or held for use in the
conduct of the Business which is owned by the Company is so owned free and clear
of all Liens and Encumbrances and no other person, including any present or
former employee, shareholder, officer of the Company, has any right whatsoever
in such Intellectual Property. The Company has right to convey to the Purchaser
the Intellectual Property being used or held for use to conduct the Business and
such conveyance will not violate any of the intellectual property rights of any
other person or entity. Neither the Company nor any present or former employee
thereof has violated or, by conducting the Business in the ordinary course would
violate, any of the intellectual property rights of any other person or entity.
Representations contained in Section II(r)(i) as related to patents expressly
exclude any patent searches or obligations by the Company to conduct patent
searches with respect to the Intellectual Property.
(ii) Except as set forth in reasonable detail in Schedule
II(r)(ii) (Third Party Technology), the Company does not have any obligation to
compensate any person or entity for the use of any Intellectual Property nor has
the Company granted to any person or entity any license, option or other rights
to use in any manner any Intellectual Property whether requiring the payment of
royalties or not. No former or current employee, contractor or consultant of the
Company has any right whatsoever to any Intellectual Property owned, licensed,
being used or held for use by the Company.
For the purposes of this Section, "Third Party Technology" shall mean
all intellectual property and products owned by third parties and licensed
pursuant to Third Party Licenses as defined below. Notwithstanding the
foregoing, Third Party Technology shall not include any "off-the-shelf" software
program if the use of such program by the Company is in accordance with any
applicable shrink wrap license and no portion of such program is distributed or
licensed by the
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Company to third parties or incorporated into products distributed by the
Company or licensed to third parties. With respect to this Section II, "Third
Party License" shall mean all licenses and other agreements with third parties
relating to any intellectual property or products that the Company is licensed
or otherwise authorized by such third parties to use in connection with the
Business. For purposes of this Section, "Intellectual Property" shall include
any patents, copyrights, trademarks, service marks, trade names, proprietary
information, know-how, and any other intellectual property or intangible asset.
(iii) No Intellectual Property is in the public domain.
(iv) All of the Company's copyright registrations related to
any and all of the Company's copyrights relating to the Business are valid and
in full force and effect. If the copyright has not been registered, then it is
not part of the foregoing representation. The Company has valid copyrights in
all material copyrightable material included in the Assets whether or not
registered with the U.S. Copyright Office, and consummation of the transactions
contemplated hereby will not alter or impair the validity of any such copyrights
or copyright registrations.
SECTION III
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE PURCHASER
The Purchaser represents and warrants to, and covenants and agrees
with, the Company, as of the date of the Closing that:
(a) ORGANIZATION. The Purchaser is a limited liability company duly
formed, validly existing, and in good standing under the laws of the State of
California.
(b) AUTHORIZATION OF TRANSACTION. The Purchaser has full power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes a valid and legal binding obligation of
the Purchaser, enforceable against it in accordance with its terms. The
Purchaser is not required to give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any government or governmental agency
in order to consummate the transactions contemplated by this Agreement.
(c) NON-CONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which the Purchaser is subject or any provision
of its certificate of formation or by-laws, if applicable, or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument or other arrangement to which the Purchaser is bound or to which any
of its assets is subject.
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SECTION IV
ADDITIONAL REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE COMPANY AND THE PURCHASER
Unless otherwise stated, the following shall survive the date of this
Agreement and the Closing:
(a) POST CLOSING COOPERATION. In case at any time after the Closing any
further action is necessary or desirable to carry out the purposes of this
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as the other
may request, all at the sole cost and expense of the requesting party (unless
the requesting party is entitled to indemnification therefor under Section VII),
so long as such documents do not increase the liability or risk of liability of
the party of whom action is requested.
(b) DELIVERY OF DISCLOSURE SCHEDULE. The Company covenants and agrees
to deliver to the Purchaser the Disclosure Schedule (as defined in Section II)
on or before December 11, 2000.
(c) ACCESS. Each party shall give to the other party (the "Reviewing
Party") and its representatives, from and after the date of execution of this
Agreement, on prior reasonable request therefor from the Reviewing Party or such
representatives, such access to the premises, employees, agents and consultants
of the other party, and such copies of the Financial Statements, books and
records, and contracts and leases and other documentation, so as to enable the
Reviewing Party to inspect and evaluate all aspects of the other party's
business and operations, assets, operating results, financial condition,
capitalization, ownership, and legal affairs thereof. This shall include the
right of the Purchaser to have Phase I environmental evaluations conducted on
the any real property owned or leased by the Company in connection with the
Business, at the Purchaser's sole expense. The Reviewing Party agrees to conduct
its review, and to cause its representatives to conduct their review, in a
manner designed to minimize any disruption of the operations of the other party.
(d) CONDUCT OF BUSINESS. From the date of this Agreement and until the
Closing or termination of this Agreement, whichever first occurs, the Company
shall use commercially reasonable best efforts, consistent with prior practice
(i) to preserve intact the business organization and employees and other
business relationships relating to the Business, (ii) to continue to operate in
the ordinary course of its business and to maintain its books, records and
accounts in accordance with GAAP, (iii) to preserve and maintain the Assets,
ordinary wear and tear excepted, (iv) notify the Purchaser with respect to any
Deferred Obligation agreements in accordance with Section I(h), (v) to not take
any action which could adversely effect the Business, and (vi) to not take any
action outside of the ordinary course of business, including without limitation,
the creation of new debt or the sale of additional equity.
(e) PURCHASER'S COVENANTS RELATING TO ADDITIONAL PURCHASE PRICE. During
the period for which the Additional Purchase Price is to be determined pursuant
to Section I(f), the Purchaser shall (a) maintain books and records and
accounting system reflecting the status of the Business for the purpose of
determining Actual Revenue and Base Revenue of the Business and making all other
determinations necessary for determination of the amount of the Additional
Purchase Price, if any; and (b) manage and operate the Business generally in
accordance with the business principles and practices employed in the management
and operation of Purchaser's own business, with a view to the achievement of
reasonable growth objectives in both sales and earnings.
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(f) EMPLOYEES.
(i) The Company agrees that on or before the Closing Date it
shall have paid all of its employees all accrued vacation pay, compensation and
other benefits owing such that on the Closing Date there are no outstanding
liabilities owing to Company employees.
(ii) The Company and Purchaser agree that they shall jointly
meet with the Company employees on or before December 10, 2000.
(iii) The Company agrees to work with the Purchaser and exert
its reasonable best efforts to insure that there are no material interruptions
in any compensation or benefits to the Company employees hired by the Purchaser
after the Closing.
(g) PAYMENT OF OBLIGATIONS AND TERMINATION OF LIENS AND ENCUMBRANCES.
The Company hereby covenants that it shall pay, at the Closing, all of the
indebtedness or other obligations listed on Schedule IV(g) (the "Obligations")
and for the holders of the Obligations to deliver, in exchange for such payment,
if applicable, (i) UCC Termination Statements or such other instruments and
documents as the Purchaser may reasonably request to effectuate the removal and
termination of such Liens and Encumbrances and evidence the release by such
holders of any claims they may have against the Assets or the Business, and (ii)
such documents as the Purchaser may reasonably request to evidence the payment
of such Obligations, including, without limitation, pay-off letters in a form
satisfactory to the Purchaser and executed by certain of the Company's vendors
and suppliers (the "Pay-off Letters"). If it is determined at any time hereafter
that the Company failed to remove or cause to be removed, without liability or
cost or expense to the Purchaser and without the disposition or diminution in
the value of any of the Assets, any Lien or Encumbrance on any of the Assets
that was in existence on or prior to the Closing Date, or if any Lien or
Encumbrance is imposed or placed on any of the Assets (or any replacements
thereof) after the Closing Date as a result of any act or omission of the
Company, occurring on, prior to or after the Closing Date, then, without
limiting any other right or remedy the Purchaser may have, the Company shall
cause such Lien or Encumbrance to be removed at no expense or liability to the
Purchaser, and without any reduction or disposition of any of the Assets.
(h) FURTHER ASSURANCES. Each party hereto shall execute and deliver
after the date hereof such instruments and take such other actions as the other
party may reasonably request without incurring any unreasonable expense in order
to carry out the intent of this Agreement or to better evidence or effectuate
the transactions contemplated herein.
(i) SUPPORT SERVICES. For a period of six (6) months after the Closing
Date, the Company shall provide support services to the Purchaser free of
charge, which shall include certain telephone services, information systems
(including email and T-1 lines) and accounting systems (including billing and
payroll) necessary for the transition of the Business to the Purchaser after the
Closing. Each party will also provide the other party with certain additional
support services, including actual telephone usage, benefit plan administration
and such other services to be mutually agreed to between the parties, and each
party will pay for such services on a monthly basis.
(j) TAXES. The Company shall pay all Taxes of any kind or nature
arising from (i) the conduct or operation of the Business up to the Closing Date
and the conduct or operation by the Company, prior to or after the Closing Date,
of any other business or business activities operations and (ii) any
liquidation, partial or whole, of the Company. If any Taxes required under this
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Section IV(j) to be borne by the Company are assessed against the Purchaser or
any of the Assets, the Purchaser shall notify the Company in writing promptly
thereafter and the Company shall be entitled to contest, in good faith, such
assessment or charge so long as such assessment does not materially adversely
affect the Purchaser or the Assets or the Business. Notwithstanding the
foregoing, the Purchaser may (but shall not be obligated to) pay any such Taxes
assessed against it, the Business or any of the Assets, but which are payable by
the Company pursuant hereto, if the Purchaser's failure to do so, in the
reasonable judgment of the Purchaser, could result in the imposition of a Lien
or Encumbrance on any of the Assets or any other assets of the Purchaser or if
the Company fails to contest such assessment or charge diligently and in good
faith. If the Purchaser pays any Taxes which pursuant hereto are required to be
borne by the Company, the Purchaser shall be entitled to reimbursement thereof
from the Company on demand. Notwithstanding anything to the contrary in this
Agreement, each party hereto agrees to pay fifty percent (50%) of any sales or
use tax assessed in connection with the transaction contemplated by this
Agreement.
(k) ACCOUNTS AND NOTES RECEIVABLE COLLECTIONS. In the event the Company
receives any payment after the Closing Date in respect of any accounts or notes
receivable included in the Assets, the Company shall promptly deliver such
payment, or the instrument of payment, with proper endorsements or assignments,
to the Purchaser. The Company further agrees to cooperate with the Purchaser in
notifying account obligors of the transfer of such accounts and notes receivable
and instructing them to make all payments in respect thereof following the
Closing Date to the Purchaser.
(l) NAMES. The Company covenants and agrees it shall not seek to limit
or otherwise impair the Purchaser's use of the names "GA Services" or "General
Automation Services" (collectively, the "Names"). The Company shall not use in
any manner, or convey any right, title or interest to any third party in, the
Names.
(m) LEASES. As soon as practicable after the date hereof, the Company
shall use its best efforts to execute its option to renew the two existing
leases on the Irvine facility (the "Irvine Leases") for a period of at least two
(2) years. If Company is successful in renewing the Irvine Leases within thirty
(30) days of the date hereof and on terms reasonably acceptable to the
Purchaser, it shall notify Purchaser and Purchaser shall assume the Irvine
Leases and the existing lease on the Company's Bohemia, New York facility (the
"New York Lease"), subject to obtaining the necessary consents and approvals for
each lease. If Company is not successful in renewing its Irvine Leases within
thirty (30) days of the date hereof, then Purchaser shall negotiate a new lease
for the Irvine facility and will not assume any Company leases, but will lease
or sublease, on a month to month basis, storage/office facilities identified on
Schedule IV(m) on terms agreed to by both Purchaser and the Company.
(n) BOARD RECOMMENDATION. The Company's Board of Directors shall
recommend to its stockholders the approval of the transaction contemplated by
this Agreement and shall not change or withdraw such recommendation.
(o) ACCOUNTS RECEIVABLE AND BUSINESS RECORDS. From and after the
Closing, the Company shall cooperate with the Purchaser, at the Purchaser's sole
expense, in the collection by Purchaser of the Accounts Receivable as set forth
on Schedule I(a). Any and all books and records which may be deemed part of the
Assets shall be made available at no cost to the Company, upon reasonable prior
notice and during normal business hours, in connection with the collection by
Company of its Accounts Receivable and for any other valid business purpose.
None of the business
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<PAGE> 23
records that constitute part of the Assets shall be destroyed by Purchasers
without the written consent of Company. The obligations set forth in this
subparagraph shall survive Closing.
SECTION V
CONDITIONS PRECEDENT
(a) CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER. The
obligation of the Purchaser to consummate the purchase of the Assets from the
Company shall be subject to the fulfillment, or the waiver by the Purchaser, at
or prior to the Closing, of each of the following conditions precedent:
(i) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Company in this Agreement and in the Schedules hereto
shall have been true and correct on the date hereof, and shall also be true and
correct at and as of the Closing Date with the same force and effect as if made
again at and as of that time.
(ii) ABSENCE OF MATERIAL LITIGATION. There shall be (i) no
pending or overtly threatened litigation (other than litigation which is
determined by the parties in good faith, after consulting their respective
attorneys, to be without legal or factual substance or merit), whether brought
against the Company or the Purchaser, that seeks to enjoin the consummation of
any of the transactions contemplated by this Agreement, (ii) no order that has
been issued by any court or governmental agency having jurisdiction that
restrains or prohibits the consummation of the purchase and sale of the Assets
hereunder and no proceedings pending which are reasonably likely to result in
the issuance of such an order; and (iii) no pending or overtly threatened
litigation, which has had or is expected to have an adverse affect on the
Business or the Assets.
(iii) PERFORMANCE OF OBLIGATIONS. The Company shall have
performed and complied with all of its covenants required by this Agreement to
have been performed on or prior to the Closing.
(iv) NO MATERIAL ADVERSE CHANGE. Since November 30, 2000,
there shall not have been any change in or other event affecting the Business or
the condition (financial or other) or operating results of Company that has had
or is expected to have a material adverse effect on the Business or the Assets.
(v) CERTIFICATES. Receipt of a certificate executed by the
Company's President or Chief Financial Officer, dated as of the Closing Date and
reasonably satisfactory in form and substance to the Purchaser, certifying that
(i) each of the representations and warranties of the Company contained herein
was true and correct when made and is true and correct on and as of the Closing
Date with the same force and effect as if such representations and warranties
had been made on the Closing Date, (ii) the Company has performed and complied
with all of its covenants required to have been performed or complied with by it
pursuant hereto on or prior to the Closing Date, and (iii) all of the conditions
precedent to the Purchaser's obligations the satisfaction of which was the
responsibility of the Company has been satisfied, except to the extent waived by
the Purchaser.
(vi) CONSENTS OBTAINED. All consents, waivers, approvals,
authorizations or orders required to be obtained by the Company and the
Purchaser for the authorization, execution and delivery of this Agreement and
the consummation by it by the transactions contemplated hereby shall have been
obtained by the Company or the Purchaser, as the case may be, including, without
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<PAGE> 24
limitation, all lease and equipment assignments and/or consents for the
assumption by, or assignment to, the Purchaser of the Assigned Contracts, in
form and substance acceptable to the Purchaser or the Purchaser's counsel in its
sole discretion.
(vii) DUE DILIGENCE. The results of the Purchaser's business,
legal and accounting due diligence with respect to the Business shall be
satisfactory to Purchaser in its sole discretion. Without limiting the
foregoing, the results of any Phase I environmental evaluation conducted by the
Purchaser on any of the real properties owned or leased by the Company in
connection with the Business shall be satisfactory to Purchaser in its sole
discretion. Upon termination due to such due diligence there shall be no further
rights under this Agreement and Company shall have absolutely no liability
whatsoever to the Purchaser.
(viii) DELIVERY OF ADDITIONAL INSTRUMENTS. On the Closing
Date, unless waived in writing by Purchaser, the Company shall deliver, or cause
to be delivered to the Purchaser, the documents and instruments referenced in
Section VI(b)(ii), in form and substance satisfactory to Purchaser and its
counsel.
(ix) MANAGER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the requisite vote
of the Managers of the Purchaser.
(x) DISCLOSURE SCHEDULE. The Disclosure Schedule to this
Agreement shall be satisfactory to the Purchaser in its sole discretion.
(xi) NO INTERFERENCE. The Company and Purchaser shall each
have entered into an agreement reasonably acceptable to each party with Tom
Wedrick and NCE Computer providing that neither Wedrick nor National Computer
Exchange (or its successor in interest) shall compete with Purchaser or the
Company for the Company's customers or employees or in any way hinder, interfere
with or prejudice Purchaser's relationships with the Company's customers or
employees.
(xii) ACCOUNTS RECEIVABLE. The Company's Accounts Receivable
aging as of the Closing shall be acceptable to the Purchaser (and shall not
exceed ninety (90) days).
(xiii) VENDOR AGREEMENTS. Purchaser shall have entered into
agreements with the vendors and suppliers listed on Schedule V(a)(xiii) upon
terms and conditions satisfactory to Purchaser.
(xiv) IRVINE LEASES. Purchaser shall have either assumed the
Company's Irvine Leases upon terms satisfactory to Purchaser or Purchaser shall
have renegotiated the Irvine Leases upon terms and conditions satisfactory to
Purchaser.
(xv) RECEIPT OF PAYOFF LETTERS. The Company shall have
received the Pay-off Letters executed by certain of the Company's vendors and
suppliers.
(b) CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE COMPANY. The
obligation of the Company to consummate the sale of the Assets to Purchaser
shall be subject to the fulfillment, or the waiver by the Company, at or prior
to the Closing, of each of the following conditions precedent:
(i) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Purchaser in this Agreement hereto shall have been true
and correct on the date hereof, and
15
<PAGE> 25
also at and as of the Closing Date with the same force and effect as if made
again at and as of that time.
(ii) ABSENCE OF MATERIAL LITIGATION. There shall be (i) no
pending or overtly threatened litigation (other than litigation which is
determined by the parties in good faith, after consulting their respective
attorneys, to be without legal or factual substance or merit), whether brought
against the Company or the Purchaser that seeks to enjoin the consummation of
any of the transactions contemplated by this Agreement, and (ii) no order that
has been issued by any court or governmental agency having jurisdiction that
restrains or prohibits the consummation of the purchase and sale of the Assets
hereunder or any proceedings pending which are reasonably likely to result in
the issuance of such an order.
(iii) PERFORMANCE OF OBLIGATIONS. The Purchaser shall have
performed and complied with all of its covenants required by this Agreement to
have been performed by it at or prior to the Closing.
(iv) CERTIFICATES. Receipt from the Purchaser of a
certificate, if applicable, dated as of the Closing Date and signed by the
President or the Chief Financial Officer of the Purchaser, certifying that (i)
each of its representations and warranties contained herein was true and correct
when made and is true and correct on and as of the Closing Date with the same
force and effect as if such representations and warranties had been made on the
Closing Date, and (ii) it has performed and complied with all agreements,
obligations, covenants and conditions required to be performed or complied with
by it pursuant hereto on or prior to the Closing Date, except as may be waived
in writing by the Company.
(v) DELIVERY OF ADDITIONAL INSTRUMENTS. On the Closing Date,
unless waived in writing by Company, the Purchaser shall deliver, or cause to be
delivered to Company, the Initial Purchase Price and the documents and
instruments referenced in Section VI(b)(i), in form and substance satisfactory
to Company and its counsel.
SECTION VI
CLOSING AND DELIVERIES
(a) TIME AND PLACE OF CLOSING. The closing of the purchase and sale of
the Assets as set forth herein (the "Closing") shall take place at 11 a.m.
Pacific Standard Time, on December 29, 2000 at the offices of Stradling, Yocca,
Carlson & Rauth, 660 Newport Center Drive, Newport Beach, California 92660, or
at such other time, date and place as the parties may agree. The term "Closing
Date," as used in this Agreement shall mean the date on which such Closing takes
place. Unless terminated earlier pursuant to the terms of this Agreement, this
Agreement shall be deemed effective as of 12:01 a.m. Pacific Standard Time on
January 1, 2001.
(b) DELIVERIES.
(i) At or prior to the Closing, the Purchaser shall deliver to
the Company the following:
(A) A wire transfer for the Payment of the Initial
Purchase Price, as described in Section I(e); and
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<PAGE> 26
(B) Such certificates, instruments and other
documents, in form and substance satisfactory to the Company and its counsel, as
they shall have reasonably requested in connection with the transactions
contemplated hereby.
(ii) At or prior to the Closing, the Company shall deliver to
the Purchaser, as a condition to Closing, the following:
(A) A bill of sale in the form attached hereto as
Exhibit A (the "Bill of Sale"), such other instruments of conveyance and
transfer, and such powers of attorney, as shall be effective to vest in the
Purchaser title to or other interest in, and the right to full custody and
control of, the Assets, free and clear of all Liens or Encumbrances whatsoever;
(B) The Assigned Contracts and the books and records
of the Company constituting a part of the Assets;
(C) Evidence that the Obligations have been paid,
including delivery of the Pay-off Letters;
(D) Such certificates, instruments and other
documents, in form and substance satisfactory to the Purchaser and its counsel,
as they shall have reasonably requested in connection with the transactions
contemplated hereby;
(E) All necessary consents of third parties under the
Assigned Contracts and other instruments of the Company to the consummation of
the transactions contemplated hereby, which consents shall not provide for the
acceleration of any liabilities or any other detriment to the Purchaser.
SECTION VII
INDEMNIFICATION
(a) INDEMNIFICATION BY THE COMPANY. Subject to the limitations set
forth in Section VII(d) below, the Company shall indemnify and hold harmless the
Purchaser and its successors and assigns, directors, officers, employees, agents
and representatives, from and against any and all losses, claims, assessments,
actions, suits, claims, demands, debts, liabilities, obligations, damages, costs
and expenses, including without limitation the cost of investigation and
reasonable attorney's fees and court costs, arising out of, resulting from,
related to, or caused by, directly or indirectly, in whole or in part any or all
of the following (hereinafter referred to collectively as "Damages"):
(i) Damages based on, arising out of or attributable to the
Retained Liabilities;
(ii) Damages based on, arising out of or attributable to any
inaccuracy in or breach or nonfulfillment of any of the representations,
warranties and covenants made by the Company in this Agreement;
(iii) Damages arising out of or attributable from the failure
of the Company to comply with the provisions of the Uniform Commercial Code
and/or any "Bulk Sales" laws, in connection with the sale of the Assets to the
Purchaser;
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<PAGE> 27
(iv) Damages arising out of or attributable to the presence on
or in or the discharge from any of the real properties owned or leased in
connection with the Business, any of the Assets or any toxic or hazardous
substances (as defined in Section II(k) above), that originated or took place
prior to the Closing Date, whether or not the same constitutes a breach of the
representations or warranties contained in Section II(k) hereof or is disclosed
in this Agreement or the Schedules hereto;
(v) Damages arising out of or attributable to the operations
prior to the Closing Date of the Company, and/or to the acts or omissions prior
to the Closing Date of any of its current or former shareholders, directors,
officers, employees or agents, including without limitation Damages arising out
of claims (a) for violation of federal or state insurance, antitrust,
securities, unfair trade practice or other laws, (b) personal injury claims, (c)
claims of any nature by past or present directors, officers, employees or agents
of the Company (including workers' compensation claims to the extent not fully
insured against and claims under federal or state employment statutes and
judicial decisions), (d) claims based on breach of warranty, products liability
or defective or omitted service, and (e) any other liability not disclosed to
the Purchaser in this Agreement or in the Schedules hereto. It is understood and
agreed that the acts, omissions or events for which Purchaser is entitled to
indemnification hereunder include, but are not limited to, claims asserted after
the Closing (whether such claims are tort claims, contract claims or otherwise)
which are based in whole or in part upon (1) alleged defects in products or
services which were either sold, delivered or rendered by the Company on or
before the Closing, (2) alleged defects in products which were in the inventory
of the Company at the time of the Closing and sold or delivered thereafter by
the Purchaser, or (3) alleged defects in services which were rendered by the
Company at the time of Closing and were completed thereafter by the Purchaser.
It is further understood and agreed that the acts, omissions and events for
which Purchaser is entitled to indemnification hereunder include claims (whether
tort, contract or otherwise) which are based upon any injury to any Person or
any damage to any property which occurs after the Closing and which results in
whole or in part from acts, omissions and events which occurred at or before the
Closing; the Company's lack of knowledge of such act, omission or event, or the
fact that such act, omission or event was unknowable by such person, shall not
be a defense to the claim for indemnity.
(vi) any liability for taxes heretofore or hereafter imposed
by any taxing authority (including penalties and interest) owed by, relating to,
resulting from or attributable to the business or operations of the Company on
or before the Closing Date, including interest and penalties related to such
taxes.
(vii) any liability or Damages arising out of or attributable
to the Company's bankruptcy, insolvency or reorganization following the Closing
Date, should such bankruptcy, insolvency or reorganization occur.
(b) INDEMNIFICATION BY THE PURCHASER. The Purchaser shall indemnify and
hold harmless the Company from and against, except to the extent resulting from
any breach by the Company of the representations, warranties and covenants of
this Agreement, (i) any and all Damages sustained or incurred by the Company by
reason of the breach of any of the obligations, covenants or provisions of, or
the inaccuracy of any of the representations or warranties made by, the
Purchaser herein; (ii) Damages arising out of or attributable to the operations
after the Closing Date of the portion of the Business which is purchased by the
Purchaser, including without limitation Damages arising out of claims (a) for
violation of federal or state insurance, antitrust, securities, unfair trade
practice or other laws, (b) personal injury claims, and (c) claims of any nature
by
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<PAGE> 28
directors, officers, employees or agents of the Purchaser based on occurrences
after the Closing Date (including workers' compensation claims to the extent not
fully insured against and claims under federal or state employment statutes and
judicial decisions); and (iii) any liability for taxes heretofore or hereafter
imposed by any taxing authority (including penalties and interest) owed by,
relating to, resulting from or attributable to the business or operations of the
portion of the Business which is purchased by the Purchaser on or after the
Closing Date, including interest and penalties related to such taxes.
(c) THIRD-PARTY CLAIMS. In the event of the assertion, in writing, of a
third-party claim or dispute which, if adversely determined would entitle any of
the parties hereunder and their directors, officers, stockholders, employees,
agents, successors, assigns and such other persons to indemnification hereunder
(the "Indemnified Parties"), the party asserting such claim ("Claimant") shall
promptly notify the other party hereto ("Respondent") in writing, provided,
however, that any delay in providing or failure to provide such notification
shall not affect the right of the Claimant to indemnification hereunder except
to the extent that the Respondent is materially prejudiced by the delay or
failure. The Respondent may elect, by written notice to the Claimant, to assume
and direct, at Respondent's sole expense, the defense of any such third-party
claim, and may, at their sole expense, retain counsel in connection therewith,
provided that such counsel is reasonably acceptable to Claimant. After the
assumption of such defense by the Respondent with counsel reasonably acceptable
to Claimant, and for so long as the Respondent conducts such defense on a
diligent and timely basis, Respondent shall not be responsible for the payment
of legal fees incurred thereafter by the Claimant, who may, continue to
participate in the defense thereof with separate counsel. If Respondent fails to
and until Respondent does undertake the defense of any such third party claim or
dispute in accordance with the provisions hereof, or if Respondent discontinues
the diligent and timely conduct thereof, the Claimant may undertake such defense
and Respondent shall be responsible for reimbursing such persons for their
reasonable legal fees and expenses incurred in connection therewith. No party
hereto may settle or compromise any such third-party claim or dispute without
the prior written consent of the other parties hereto.
(d) PROCEDURES APPLICABLE TO INDEMNIFICATION CLAIMS. To be effective,
any claim for indemnification under this Section VII by any of the Indemnified
Parties must be made by a written notice (a "Notice of Claim") to Respondent
given in accordance with the provisions of Section VII(d) hereof. Upon receipt
of a Notice of Claim, Respondent shall have thirty (30) calendar days to contest
its indemnification obligation with respect to such claim, or the amount
thereof, by written notice to Claimant (a "Contest Notice"). Such Contest Notice
shall specify the reasons or bases for the objection of Respondent to the
indemnification claim, and if the objection relates to the amount of the
liability asserted, such Contest Notice shall also set forth the amount, if any,
which Respondent believes is due the Claimant. If a Contest Notice is not given
to the Claimant within such 30-day period, the obligation of Respondent to pay
to the Indemnified Parties the amount of the Claimant liability arising out of
the matters set forth in the Notice of Claim shall be deemed established and
accepted by Respondent. If, on the other hand, Respondent contests a Notice of
Claim within such 30-day period, Claimant and the Respondent shall thereafter
attempt in good faith to resolve their dispute by agreement. If they are unable
to so resolve their dispute within the thirty (30) days, the parties may resort
to any remedy they may have at law or in equity. Upon final determination of the
amount of the Claimant liability that is the subject of an indemnification claim
(whether such determination is the result of Respondent's acceptance of or
failure to contest a Notice of Claim, or of a full and final resolution of any
dispute with respect thereto by agreement of the parties or otherwise as
determined by a court of competent jurisdiction), such amount shall be paid, in
cash by Respondent to the Indemnified Party or Parties who have been determined
to be entitled thereto
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<PAGE> 29
within ten (10) business days of such final determination of the amount of the
Claimant liability due by Respondent. Any amount that becomes due hereunder and
is not paid when due shall bear interest at a rate of ten percent (10%) per
annum until paid. No funds shall be paid out of the Holdback Amount once a
Contest Notice has been filed, until such time as a court of competent
jurisdiction has rendered a full and final determination concerning such claim.
If any liability has been established pursuant to Section VII(a), Purchaser
shall be entitled to be paid from the Holdback Amount all or part of the
liability, which shall be deemed to satisfy the obligations of the Company to
pay such liability, only to the extent of such payment.
(e) OFFSET. The Purchaser may reduce the Additional Purchase Price by
an amount equal to the amount of any Damages to which it is entitled to
hereunder. Nothing herein shall be deemed to be a waiver of the Purchaser's
right to seek recovery against the Company through other means.
SECTION VIII
TERMINATION
(a) CIRCUMSTANCES OF TERMINATION. This Agreement may be terminated and
the transactions herein contemplated may be abandoned at any time prior to the
Closing by either party.
(b) PROCEDURE UPON TERMINATION. In the event of termination of this
Agreement pursuant to Section VIII(a) hereof, written notice thereof shall
forthwith be given to the other party or parties hereto and the transactions
contemplated herein shall be abandoned without further action by the Purchaser
or the Company. In addition, if this Agreement is terminated as provided herein:
(i) Each party will redeliver all documents, workpapers and
other material of any other party relating to the transactions contemplated
hereby, whether so obtained before or after the execution hereof, to the party
furnishing the same.
(ii) All information of a confidential nature received by any
party hereto with respect to the business of any other party (other than
information which is a matter of public knowledge or which has heretofore been
or is hereafter published in any publication for public distribution or filed as
public information with any governmental authority) shall continue to be kept
confidential for a period of two (2) years.
(iii) Upon any termination of this Agreement pursuant to
Section VIII(a) hereof the respective obligations of the parties hereto under
this Agreement shall terminate and no party shall have any liability whatsoever
to any other party hereto by reason of such termination, irrespective of the
cause of such termination.
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<PAGE> 30
SECTION IX
MISCELLANEOUS
(a) NOTICES. All notices, requests or instructions hereunder shall be
in writing and delivered personally, sent by telecopy or sent by registered or
certified mail, postage prepaid, as follows:
If to the Purchaser: GA Services, LLC
17742 Mitchell North
Irvine, California 92614
Attention: Charles S. Strauch
Facsimile No.: (949) 499-4945
Telephone No.: (949) 499-6275
with a copy to: Stradling Yocca Carlson & Rauth
660 Newport Center Drive, Suite 1600
Newport Beach, California 92660-6441
Attention: Nick E. Yocca, Esq.
Facsimile No.: (949) 725-4100
If to the Company: General Automation, Inc.
17731 Mitchell North
Irvine, California 92614
Attention: Julie Christie
Facsimile No.: (949) 752-6772
Telephone No.: (949) 250-4800
with a copy to: Horwitz & Beam
Two Venture Plaza, Suite 350
Irvine, California 92618
Attention: Lynne Bolduc, Esq.
Facsimile No.: (949) 453-9416
Telephone No.: (949) 453-0300
Any of the above addresses may be changed at any time by notice given
as provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered or telecopied, and two business days after the date of
mailing, if mailed.
(b) SURVIVAL OF REPRESENTATIONS. Each representation, warranty,
covenant and agreement of the parties hereto herein contained shall survive the
Closing, notwithstanding any investigation at any time made by or on behalf of
any party hereto.
(c) ENTIRE AGREEMENT. Except as provided in Sections 4, 7 and 8 of that
certain Letter of Intent, dated November 13, 2000, this Agreement and the
documents referred to herein contain the entire agreement among the parties
hereto with respect to the transactions contemplated hereby, and no modification
hereof shall be effective unless in writing and signed by the party against
which it is sought to be enforced.
(d) EXPENSES. Except as otherwise provided herein, each of the parties
hereto shall bear such party's own expenses in connection with this Agreement
and the transactions contemplated hereby.
(e) INVALIDITY. Should any provision of this Agreement be held by a
court or arbitration panel of competent jurisdiction to be enforceable only if
modified, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties
hereto with any such modification to become a part hereof and treated as though
originally set forth in this Agreement. The parties further agree that any such
court or arbitration panel is
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<PAGE> 31
expressly authorized to modify any such unenforceable provision of this
Agreement in lieu of severing such unenforceable provision from this Agreement
in its entirety, whether by rewriting the offending provision, deleting any or
all of the offending provision, adding additional language to this Agreement, or
by making such other modifications as it deems warranted to carry out the intent
and agreement of the parties as embodied herein to the maximum extent permitted
by law. The parties expressly agree that this Agreement as modified by the court
or the arbitration panel shall be binding upon and enforceable against each of
them. In any event, should one or more of the provisions of this Agreement be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provisions hereof, and
if such provision or provisions are not modified as provided above, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provisions had never been set forth herein.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Company and the
Purchaser.
(g) GOVERNING LAW. The validity of this Agreement and of any of its
terms or provisions, as well as the rights and duties of the parties under this
Agreement, shall be construed pursuant to and in accordance with the laws of the
State of California, without regard to conflict of laws principles. All actions
brought, arising out of, or related to this Agreement shall be settled in
appropriate federal or state courts located in Orange County, California.
(h) COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
(i) ATTORNEYS' FEES. If legal action is brought by either party to
enforce or interpret this Agreement, the prevailing party shall be entitled to
recover its attorneys' fees and legal costs in connection therewith.
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the date first above written.
PURCHASER: GA SERVICES, LLC
By: /s/ Charles Strauch
-----------------------------------
Name: Charles Strauch
Title: Chairman
COMPANY: GENERAL AUTOMATION, INC.
By: /s/ R. D. Bagby
-----------------------------------
Name: Robert D. Bagby
Title: Vice Chairman
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<PAGE> 32
PROXY
GENERAL AUTOMATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 29, 2000
The undersigned hereby appoints Richard H. Nance, Vice President Finance, Chief
Financial Officer, and Secretary with full power of substitution, as his or her
Proxy to represent and vote, as designated below, all of the shares of the
Common Stock of General Automation, Inc. (the "Company"), registered in the name
of the undersigned on December 29, 2000, with the powers the undersigned would
possess if personally present at the 2000 Special Meeting of Stockholders to be
held at the offices of the Company, 17731 Mitchell North, Irvine, California
92614, at 10:00 A.M., Pacific time on December 29, 2000 and at any adjournment
thereof, hereby revoking any proxy or proxies previously given.
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<PAGE> 33
Please mark
your votes as [X]
indicated in
this example
FOR AGAINST ABSTAIN
1. To approve the sale of the Company's [ ] [ ] [ ]
service business unit:
FOR AGAINST ABSTAIN
2. To authorize a name change of the [ ] [ ] [ ]
Company to GA eXpress, Inc.:
FOR AGAINST ABSTAIN
3. To increase the number of authorized [ ] [ ] [ ]
shares of common stock of the Company
from 30,000,000 to 50,000,000:
FOR AGAINST ABSTAIN
4. To increase the number of shares reserved [ ] [ ] [ ]
for issuance under the Company's 1999
Stock Option Plan from 1,000,000 to
2,500,000:
Discretionary authority is hereby granted with respect to such other matters
as may properly come before the Special Meeting.
THIS PROXY, WHEN PROPERLY EXECUTED,
WILL BE VOTED AS DIRECTED. IF NO
DIRECTION IS GIVEN, THE PROXY WILL
BE VOTED "FOR" ALL PROPOSALS LISTED,
AND IN THE PROXY'S DISCRETION ON ANY
OTHER MATTERS TO COME BEFORE THE
MEETING.
Signature(s)_________________________ Dated:____________, 2000
PLEASE DATE AND SIGN ABOVE exactly as your name appears on your Stock
Certificate, indicating where appropriate, official position or representative
capacity.
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