<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended July 2, 1995
Commission File Number 0-10886
REXON INCORPORATED
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 95-4317481
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Progress Plaza
Suite 2110
St. Petersburg, Florida 33701
------------------------ -----
(Address of principal executive offices) Zip Code
</TABLE>
(813) 896-9609
Registrant's telephone number including area code
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
At August 1, 1995, Registrant had 10,376,157 shares of Common Stock
outstanding.
(This document contains a total of 15 pages.)
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REXON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
July 2, October 2,
1995 1994
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 786 $ 2,045
Trade accounts receivable, less
allowance of $2,122 (1995)
and $1,343 (1994) 37,981 36,885
Inventories 25,423 26,538
Net assets of business held for sale 4,056 0
Prepaid expenses and other current
assets 2,814 2,016
-------- --------
TOTAL CURRENT ASSETS 71,060 67,484
GOODWILL, LESS ACCUMULATED
AMORTIZATION 0 12,444
PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS 38,100 36,871
Less: Accumulated depreciation and
amortization (26,611) (24,687)
-------- --------
11,489 12,184
CAPITALIZED SOFTWARE, NET OF
ACCUMULATED AMORTIZATION 0 5,777
OTHER ASSETS 2,042 2,495
-------- --------
$ 84,591 $100,384
======== ========
</TABLE>
See Notes to consolidated financial statements.
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REXON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
July 2, October 2,
1995 1994
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable $ 35,644 $ 28,148
Accrued other expenses 8,195 9,005
Accrued income taxes 1,467 3,124
Current portion of long-term obligations 20,175 387
-------- --------
TOTAL CURRENT LIABILITIES 65,481 40,664
LONG-TERM OBLIGATIONS 4,877 18,631
OTHER 1,959 2,643
CONTINGENCIES (Note E)
REDEEMABLE convertible preferred stock, $.01 par value;
authorized 1,000,000 shares; issued and outstanding
480,000 shares at July 2, 1995 and at October 2, 1994 4,800 4,800
COMMON STOCKHOLDERS' EQUITY
Common Stock, $.01 par value;
authorized 15,000,000 shares;
issued and outstanding 10,376,000 shares
at July 2, 1995 and 10,054,000 shares
at October 2, 1994 103 101
Additional paid-in capital -- common stock 51,487 50,129
Accumulated deficit (44,116) (16,584)
-------- --------
Total Stockholders' Equity 7,474 33,646
-------- --------
$ 84,591 $100,384
======== ========
</TABLE>
See Notes to consolidated financial statements.
3
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REXON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FISCAL PERIODS ENDED JULY 2, 1995
AND JULY 3, 1994
(Unaudited)
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
----------------------- -------------------------
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Sales $ 38,360 $ 49,133 $132,838 $141,861
Cost of Goods Sold 36,338 37,467 109,437 109,906
Other Costs 2,824 0 2,824 0
-------- -------- -------- --------
(802) 11,666 20,577 31,955
-------- -------- -------- --------
Selling, general and administrative 7,025 8,418 20,812 23,413
Research and development 2,173 2,774 6,661 8,317
Other, net 815 366 2,273 893
Restructuring and Reorganization 2,644 0 2,644 0
-------- -------- -------- --------
12,657 11,558 32,390 32,623
-------- -------- -------- --------
Income (loss) before discontinued business
and income taxes (13,459) 108 (11,813) (668)
Income taxes (benefit) (2,060) 12 (2,000) (78)
-------- -------- -------- --------
Income (loss) from continuing operations
before discontinued operations (11,399) 96 ( 9,813) (590)
-------- -------- -------- --------
Discontinued Operations
Income (loss) on discontinued business
(less applicable income taxes of
$10 and $100 for the three and nine months
ended July 3, 1994, respectively) (866) 124 (1,398) 848
Loss on disposal of discontinued business (16,141) 0 (16,141) 0
-------- -------- -------- --------
Net income (loss) (28,406) 220 (27,352) 258
Dividends on preferred stock (60) (60) (180) (145)
-------- -------- -------- --------
Net income (loss) attributable to common stock ($28,466) $160 ($27,532) $113
======== ======== ======== ========
Net income (loss) per share attributable to
Common stock:
Continuing operations ($1.11) $0.01 ($0.97) ($0.07)
Discontinued operations (1.64) 0.01 (1.71) 0.08
======== ======== ======== ========
Net income (loss) per share ($2.75) $0.02 ($2.68) $0.01
Weighted average shares outstanding 10,361 10,535 10,268 10,350
</TABLE>
See Notes to consolidated financial statements.
4
<PAGE> 5
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REXON INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JULY 2, 1995
AND JULY 3, 1994
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
-------------------------------
July 2, July 3,
1995 1994
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss): ($27,352) 258
Restructuring, reorganization and other costs 5,468 0
Depreciation and amortization 5,937 6,612
Provision for doubtful accounts 804 927
Accrued and deferred income taxes (1,657) 22
Loss on disposal of business 16,141 0
Changes in operating assets and liabilities:
Accounts receivable (2,933) (2,281)
Inventories and prepaid expenses, net (3,178) (383)
Accounts payable and accrued expenses 4,035 (2,789)
------- -------
Net cash provided by (used in) operating activities (2,735) 2,366
------- -------
INVESTING ACTIVITIES:
Purchases of property and equipment (2,100) (3,879)
Increase in capitalized software, licenses and other assets (3,140) (4,116)
Cash acquired in acquisition of Cal-Emeritus 0 185
------- -------
Net cash used in investing activities (5,240) (7,810)
------- -------
FINANCING ACTIVITIES:
Net proceeds from line of credit and long term obligations 5,536 3,666
Proceeds from issuance of common stock 1,360 1,050
Preferred dividends paid (180) (145)
------- -------
Net cash provided by financing activities 6,716 4,571
------- -------
Decrease in cash and cash equivalents (1,259) (873)
Cash and cash equivalents at beginning of period 2,045 3,273
------- -------
Cash and cash equivalents at end of period $ 786 $ 2,400
======= =======
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 6
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Nine Months Ended
-----------------
July 2, July 3,
1995 1994
---- ----
<S> <C> <C>
Cash Paid For:
Interest $1,585 $671
Income Taxes $ -0- $ -0-
</TABLE>
6
<PAGE> 7
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REXON INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
The accompanying unaudited Consolidated Financial Statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. In the opinion of management, adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the period ended July 2, 1995 are not
necessarily indicative of the results that may be expected for the year. For
further information, refer to the consolidated financial statements and notes
thereto for the year ended October 2, 1994, included in the 1994 Annual Report
to Stockholders.
Certain reclassifications have been made to prior year amounts to conform with
current year classifications.
NOTE B -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
July 2, October 2,
1995 1994
---- ----
(in thousands)
<S> <C> <C>
Raw materials $14,099 $14,255
Work-in-process 5,072 7,870
Finished products 6,252 4,413
------- -------
$25,423 $26,538
======= =======
</TABLE>
7
<PAGE> 8
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NOTE C -- INCOME PER SHARE
Per share data is based on the weighted average number of shares outstanding
and common stock equivalents, excluding those common stock equivalents that
would have the effect of being antidilutive.
Income per share computations limit the assumption of the repurchase of
treasury shares to a maximum of twenty percent of the outstanding shares of the
Company, with the remaining pro forma proceeds, where applicable, being applied
to reduce interest-bearing liabilities. Accordingly, interest expense based on
the Company's average cost of funds is reduced, and net income is increased.
For purposes of the income per share computations, the net income (loss)
attributable to common stock was computed by deducting (adding) preferred stock
dividends from the Company's reported net income (loss) for the period.
NOTE D -- DISCONTINUED OPERATIONS
In the third quarter of fiscal year 1995, the Company entered into discussions
with potential buyers of its software business segment which includes Sytron
Corporation and Rexon Software. An agreement was entered into on July 25, 1995
for the sale of a substantial portion of the assets of Sytron Corporation to
Arcada Software Corporation for $4,500,000. The Company anticipates that the
sale of the remaining operations of such business segment will be completed by
the end of calendar 1995.
The results below for the business segment being divested have been reported
separately as discontinued operations in the consolidated statements of
operations.
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
------------- -----------------
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $2,704 $3,928 $9,601 $10,937
(Loss) Income before income taxes (866) 134 (1,398) 948
Income tax (benefit) expense -0- 10 -0- 100
Net income (loss) from
discontinued operations (866) 124 (1,398) 848
------ ------ ------ -------
</TABLE>
The estimated loss on disposal of the discontinued operations is $16,141,000,
which includes a provision for anticipated operating losses until disposal
totaling approximately $950,000 and goodwill and capitalized software cost.
The net assets and liabilities relating to the software operations have been
segregated on the consolidated balance sheet for the period ended July 2, 1995
from their historical classifications to
8
<PAGE> 9
separately identify them at their estimated net realizable value. As
management completed the disposition of most of these assets in August 1995,
and anticipate the remainder to occur in calendar 1995, the net assets of
business held for sale have been classified in current assets.
NOTE E -- LONG TERM DEBT
The Company entered into a secured revolving credit agreement with Sanwa
Business Credit Corporation in October 1994 (amended from time to time through
July 1995) (the "Credit Agreement"), which provides for a total line of credit
of up to $23 million, consisting of advances against eligible domestic and
foreign accounts receivable. The credit agreement has financial covenants that
require the Company to meet a quarterly pre-tax operating profit (loss) level
in the third quarter of not greater than ($4.3) million, a leverage ratio of
5.5 to 1 or less and the actual ratio was 6.21 to 1, and a tangible net worth
equal to or greater than $10.9 million and the actual was $10.9 million. At
July 2, 1995, the Company was out of compliance with the profit and lever or
ratio covenant, and the Company has entered into negotiations with its lender
seeking to modify such covenants. There is, of course, no assurance that the
Company will be successful in these efforts (see discussion in Management's
Discussion and Analysis of Financial Condition and Results of Operations).
As a result of such noncompliance the indebtedness of $19.9 million could be
accelerated by its lender. Accordingly, at July 2, 1995 the borrowings have
been classified as current.
NOTE F -- RESTRUCTURING AND REORGANIZATION, AND OTHER COSTS
During the third quarter, the Company announced the closure of its Solon, Ohio
administration and distribution facility, and its repair center located in
Puerto Rico. The total costs of these closures is approximately $2.6 million,
including $1.6 million for Solon and $1.0 million for Puerto Rico. As of July
2, 1995 accrued closure costs amounted to approximately $1.3 million and is
expected to be incurred in the fourth quarter of fiscal 1995. Accrued costs
are primarily severance costs for employees for which notice of termination was
given during the third quarter.
In addition, during the third quarter the Company completed its closure of Simi
Valley and the Puerto Rico manufacturing facilities and identified inventory
losses associated with these closures and further inventory which was
considered obsolete for the continuing business. These items have been
reported as a separate component of cost of goods due to the nature of the
items noted.
9
<PAGE> 10
PART 1. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentages which
certain items of expense or income bear to the Company's net sales.
<TABLE>
<CAPTION>
Percentage of Net Sales
Quarter Ended Nine Months Ended
------------- -----------------
7/2/95 7/3/94 7/2/95 7/3/94
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net sales 100% 100% 100% 100%
Cost of goods sold 95% 76% 82% 77%
Other Costs 7% 0% 2% 0%
Selling, general and administrative 18% 17% 16% 17%
Research & development 6% 6% 5% 6%
Other, net 2% 1% 2% 1%
Restructuring and reorganization expense 7% 0% 2% 0%
Income (loss) before discontinued operations
and income taxes (35%) 1% (9%) (1%)
Income taxes (benefit) (5%) 0% (1%) 0%
Income (loss) from continuing operations
before discontinued operations (30%) 1% (8%) (1%)
Income (loss) on discontinued business (2%) 1% (1%) 1%
Loss on disposal of discontinued business (42%) 0% (12%) 0%
Net income (loss) (74%) 1% (21%) 1%
</TABLE>
Net sales decreased by $10.8 million or 22% in the third quarter of fiscal 1995
compared with the same quarter in fiscal 1994 and decreased by $9.0 million or
6% for the first nine months of fiscal 1995 over the same period of fiscal
1994. The decrease in revenues was principally due to the continuing softness
in the markets for the Company's lower-capacity drive products, which was
caused, in substantial part, by market uncertainties resulting from the
introduction of the new TRAVAN format tape drives. The Company's objective is
to increase revenues through the introduction of its new TRAVAN products.
Cost of goods sold as a percentage of net sales increased to 95% from 76% in
the third quarter of fiscal 1995 and increased to 82% from 77% for the first
nine months of fiscal 1995. The significant decrease in third quarter revenues
was principally responsible for the major increase in the cost of goods sold as
a percentage of net sales, as average selling prices and gross margins declined
significantly due to the adverse market conditions noted above. The Company
plans to improve gross margins through the introduction of its new products,
including TRAVAN and by reducing the cost of its product by reducing factory
overhead (closure of Solon) and by redesigning its products to take advantage
of lower cost materials.
In addition, during the third quarter the Company completed its closure of Simi
Valley and the Puerto Rico manufacturing facilities and identified inventory
losses associated with these closures and further inventory which was
considered obsolete for the continuing business.
10
<PAGE> 11
These items have been reported as a separate component of cost of goods due
to the nature of the items noted.
Selling, general and administrative expenses increased to 18% from 17% of net
sales for the third fiscal quarters of fiscal 1995 and 1994, respectively,
while decreasing to 16% from 17% for the first nine months of fiscal 1995
versus the first nine months of fiscal 1994. Actual selling, general and
administrative expense decreased by $1.4 million, or 17%, for the third fiscal
quarter of 1995 as compared to the third fiscal quarter of 1994, and decreased
by $2.6 million, or 11%, for the first nine months of fiscal 1995 compared with
the first nine months of fiscal 1994. These reductions results from the
Company's restructuring plan, including facilities closure and reduced
headcount.
Research and development expenditures remained constant at 6% of net sales for
the third fiscal quarter of fiscal 1995 and fiscal 1994, while decreasing to 5%
for the first nine months of fiscal 1995 from 6% for the first nine months of
fiscal 1994. The Company continues to work on the development of new products,
such as the TRAVAN product line, and cost reduced versions of the Company's
existing products. Headcount reductions resulting from the Company's
restructure plan account for the fall in absolute terms from the prior year.
During the third quarter, the Company announced the closure of its Solon, Ohio
administration and distribution facility, and its repair center located in
Puerto Rico. The total costs of these closures is approximately $2.6 million,
including $1.6 million for Solon and $1.0 million for Puerto Rico. As of July
2, 1995, accrued closure costs amounted to approximately $1.3 million and is
expected to be incurred in the fourth quarter of fiscal 1995. Accrued costs
are primarily severance costs for employees for which notice of termination was
given during the third quarter.
Income from continuing operations before income taxes as a percent of net sales
decreased to (35%) in the third quarter of fiscal 1995 from 1% in the third
quarter of fiscal 1994, while decreasing to (9%) from (1%) for the first nine
months of fiscal 1995 as compared to the first nine months of fiscal 1994. The
results of the third fiscal quarter of 1995 were significantly impacted by the
reorganization and restructuring and other costs incurred, as well as the
significant revenue and gross margin declines previously discussed.
As of July 2, 1995, the Company's balance of cash and cash equivalents was $0.8
million compared to $2.0 million at October 2, 1994. For the first nine months
of fiscal 1995, net cash used by operating activities amounted to $2.7 million
after taking into account an increase of $2.9 million in accounts receivable, a
$3.2 million increase in inventories and prepaid expenses and a $4.0 million
increase in accounts payable and accrued expenses. Major cash expenditures for
investing activities for the period included the purchase of $2.1 million of
capital equipment. Cash generated from financing activities include $5.5
million provided from the Company's line of credit and $1.4 million from
issuance of common stock.
The Company entered into a secured revolving credit agreement with Sanwa
Business Credit Corporation in October 1994 (amended from time to time through
July 1995) (the "Credit Agreement"), which provides for a total line of credit
of up to $23 million, consisting of advances against eligible domestic and
foreign accounts receivable. The advances under the credit agreement are
limited to eighty percent (80%) of eligible domestic accounts and sixty percent
(60%) of eligible foreign accounts up to a maximum advance on eligible foreign
accounts of $10
11
<PAGE> 12
million. The credit agreement has financial covenants that require the Company
to meet quarterly profit levels, specified leverage ratios, and certain levels
of tangible net worth. At July 2, 1995, the Company was out of compliance with
the required financial covenants (see Note E of Notes to Financial Statements),
and the Company has entered into negotiations with its lender seeking to
modify such covenants. The Company believes that such lender would be willing
to enter into a further amendment to the Credit Agreement to bring the Company
into compliance if it is successful in raising additional working capital
through the placement of debt and/or the issuance of additional securities, and
the Company is presently taking efforts in this regard. There is, of course,
no assurance that the Company will be successful in these efforts nor that,
even if successful, a Credit Agreement amendment will be completed;
furthermore, any such financing could be materially dilutive to the existing
stockholders. Pursuant to such proposed new financing, the Company is also
seeking to modify payment terms to certain of its major vendors, and believes
it necessary to issue common stock purchase warrants in this regard. The
completion of such new financing is deemed to be essential to the Company.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEMS 1 THROUGH 5 - Not Applicable
ITEM 6 - Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
10.1 Fifth Amendment to Loan and Security Agreement,
dated May 15, 1995.
10.2 Sixth Amendment to Loan and Security Agreement,
dated July 1995.
10.3 Asset Purchase Agreement by and among Rexon, Incorporated,
Sytron Corporation and Arcada Software, Inc.
11.1 Statement of Computation of Per Share Earnings.
(b) No reports on Form 8-K were filed during the fiscal quarter covered by
this Report on Form 10-Q.
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
REXON INCORPORATED
(Registrant)
Dated: August 15, 1995 /s/Irvin R. Reuling
-----------------------------------
Irvin R. Reuling
Chief Financial Officer & Secretary
(Principal Financial and
Accounting Officer)
14
<PAGE> 1
EXHIBIT 11.1
REXON INCORPORATED AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
Fiscal Periods Ended July 2, 1995 and July 3, 1994
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
------------- -----------------
July 2, July 3, July 2, July 3,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income (loss) from continuing operations ($11,399) $ 96 ($9,813) ($590)
Preferred Stock dividends 60 60 180 145
Income (loss) from continuing operations
attributable to common stock
-------- ------ -------- ------
used to compute earnings per share (11,459) 36 (9,993) (735)
-------- ------ -------- ------
Income (loss) on discontinued business (866) 124 (1,398) 848
Loss on disposal of discontinued business (16,141) 0 (16,141) 0
-------- ------ -------- ------
Income (loss) on discontinued business
attributable to common stock used
to compute earnings per share (17,007) 124 (17,539) 848
-------- ------ -------- ------
Income (loss) attributable
to common stock used to compute
earnings per share ($28,466) $160 ($27,532) $113
======== ====== ======== ======
Weighted average number of
Common shares outstanding 10,361 9,950 10,268 9,765
Dilutive effect of stock options
and warrants after application of
treasury stock method -0- 585 -0- 585
-------- ------ -------- ------
Average number of common stock
common stock equivalents outstanding 10,361 10,535 10,268 10,350
======== ====== ======== ======
Net income (loss) per share
attributable to Common shares
outstanding:
Continuing operations ($1.11) $.01 ($.97) ($0.07)
Discontinued operations (1.64) .01 ( 1.71) 0.08
-------- ------ -------- ------
Net income (loss) per share ($2.75) $.02 ($2.68) $0.01
======== ====== ======== ======
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-01-1995
<PERIOD-START> OCT-03-1994
<PERIOD-END> JUL-02-1995
<CASH> 786
<SECURITIES> 0
<RECEIVABLES> 37,981
<ALLOWANCES> 2,122
<INVENTORY> 25,423
<CURRENT-ASSETS> 71,060
<PP&E> 38,100
<DEPRECIATION> 26,611
<TOTAL-ASSETS> 84,591
<CURRENT-LIABILITIES> 65,481
<BONDS> 0
<COMMON> 103
0
4,800
<OTHER-SE> 51,487
<TOTAL-LIABILITY-AND-EQUITY> 84,591
<SALES> 132,838
<TOTAL-REVENUES> 132,838
<CGS> 109,437
<TOTAL-COSTS> 112,261
<OTHER-EXPENSES> 32,390
<LOSS-PROVISION> 804
<INTEREST-EXPENSE> 1,635
<INCOME-PRETAX> (11,813)
<INCOME-TAX> (2,000)
<INCOME-CONTINUING> (9,813)
<DISCONTINUED> (17,539)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (27,352)
<EPS-PRIMARY> (2.68)
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
FIFTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Fifth Amendment to Loan and Security Agreement ("Fifth
Amendment") is made as of May 15, 1995 by and between SANWA BUSINESS CREDIT
CORPORATION ("Lender") and Rexon Incorporated, a Delaware corporation
("Rexon"), Rexon Software, Inc., a California corporation ("Rexon Software"),
Rexon/Tecmar, Inc., a California corporation, Scientific Solutions, Inc., an
Ohio corporation, Sytron Corporation, a Delaware corporation ("Sytron"),
WangDAT, Inc., a California corporation, and Wangtek, Inc., a California
corporation (each a "Borrower", collectively, the "Borrowers").
WHEREAS, Lender and Borrowers entered into a Loan and Security
Agreement dated as of October 5, 1994, as amended by the First Amendment to
Loan and Security Agreement dated as of October 17, 1994, the Second Amendment
to Loan and Security Agreement dated as of December 27, 1994, the Third
Amendment to Loan and Security Agreement dated as of March 24, 1995 and the
Fourth Amendment to Loan and Security Agreement dated as of April 15, 1995
(collectively, the "Loan Agreement") pursuant to which Lender is making certain
loans or other credit facilities available to Borrowers upon the terms and
conditions set forth in the Loan Agreement and the related Ancillary
Agreements; and
WHEREAS, Borrowers have requested and Lender has agreed to certain
waivers, modifications and amendments to the Loan Agreement as set forth in
this Fifth Amendment.
NOW, THEREFORE, in consideration of the terms and conditions
herein, and of any loans or other credit facilities heretofore, now or
hereafter made to or for the benefit of Borrowers by Lender, the parties hereto
agree to the following amendments and modifications to the Loan Agreement:
1. Waiver. Lender hereby waives any Default arising under
Section 10.1(a)(ii) by reason of Borrowers failure to satisfy the requirement
for the ratio of Indebtedness minus Subordinated Debt to Tangible Net Worth set
forth therein for the 2nd fiscal quarter of 1995 ending March 31, 1995.
2. Amendments to Loan Agreement. Section 10.1(f) of the Loan
Agreement is hereby amended by adding a new subsection (vii) to the end thereof
as follows:
"(vii) as soon as available, but not later than forty-five (45)
days after the end of each fiscal quarter, a report for all Borrowers setting
forth any new applications for patents, trademarks or copyrights made or
granted during that quarter, and certified by a senior officer of Rexon."
-1-
<PAGE> 2
3. Representations and Warranties. Borrowers represent and
warrant as follows:
(a) Each of the representations and warranties contained in the
Loan Agreement is hereby reaffirmed as of the date hereof, each as if set forth
herein;
(b) The execution, delivery and performance of this Fifth
Amendment are within Borrowers' powers, have been duly authorized by all
necessary action, have received all necessary approvals, if any, and do not
contravene any law or any contractual restrictions binding on Borrowers;
(c) This Fifth Amendment is a legal, valid and binding
obligation of Borrowers, enforceable against Borrowers in accordance with its
terms; and
(d) No event has occurred and is continuing or would result
from this Fifth Amendment which constitutes a Default under the Loan Agreement,
as amended and modified hereby.
4. Conditions. The effectiveness of this Fourth Amendment is
conditioned upon the full satisfaction by Borrowers of each of the following
conditions on or before May 15, 1995 or their waiver in writing by Lender:
(a) this Fifth Amendment and the Guarantor's Consent shall have
been executed by duly authorized signatories of the Borrowers and Guarantors
and delivered to Lender; and
(b) Borrowers shall have paid to Lender an amendment fee in the
amount of $15,000, which fee is fully earned as of the date of this Fifth
Amendment.
5. Miscellaneous. This Fifth Amendment shall be part of the
Loan Agreement, the terms of which are incorporated herein, and the breach of
any representation, warranty or covenant contained herein or the failure to
observe or comply with any term or agreement contained herein, shall constitute
a Default under the Loan Agreement and Lender shall be entitled to exercise all
rights and remedies it may have under the Loan Agreement and applicable law.
Borrowers agree to pay all costs, expenses and attorneys' fees incurred by
Lender in connection with the negotiation and preparation of this Fifth
Amendment and any other documents in connection herewith and in carrying out or
enforcing the terms of this Fifth Amendment. Lender is not waiving any rights
under the Loan Agreement and, except as expressly provided herein or as
previously modified in a writing signed by Lender, all of the terms, covenants,
and conditions of the Loan Agreement remain unmodified and in full force and
effect. Capitalized terms used
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<PAGE> 3
herein and not otherwise defined shall have the same meaning as set forth in
the Loan Agreement. This Fifth Amendment may be executed in counterparts,
which counterparts, when so executed and delivered, shall together constitute
but one original.
IN WITNESS WHEREOF, the parties hereto have executed this Fifth
Amendment to be effective as of the first date above written.
BORROWERS:
---------
REXON INCORPORATED, SCIENTIFIC SOLUTIONS, INC.
a Delaware corporation an Ohio corporation
By_______________________________ By______________________________
Title____________________________ Title___________________________
REXON/TECMAR, INC., SYTRON CORPORATION,
a California corporation a Delaware Corporation
By_______________________________ By______________________________
Title____________________________ Title___________________________
WANGTEK, INC., WANGDAT, INC.,
a California corporation a California corporation
By_______________________________ By______________________________
Title____________________________ Title___________________________
LENDER:
------
SANWA BUSINESS CREDIT CORPORATION
By_______________________________
Title____________________________
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<PAGE> 4
GUARANTORS' CONSENT
The undersigned Guarantors hereby acknowledge and consent to the foregoing
Fifth Amendment and reaffirm their respective guarantees, security agreements
and other documents executed by the undersigned in connection with the Loan
Agreement and agree that all such guarantees, security agreements and documents
are in full force and of effect.
"GUARANTORS"
REXON EUROPE, INC., a
Delaware corporation
By______________________________
Title___________________________
REXON INTERNATIONAL SALES CORPORATION,
a California corporation
By______________________________
Title___________________________
REXON INTERNATIONAL SERVICE CO.,
a Delaware corporation
By______________________________
Title___________________________
REXON SINGAPORE PTE LTD.,
a Singapore corporation
By______________________________
Title___________________________
-4-
<PAGE> 5
REXON U.K., INC.,
a Delaware corporation
By______________________________
Title___________________________
SYTRON U.K., INC.,
a corporation
By______________________________
Title___________________________
TECMAR PUERTO RICO, INC.,
a Delaware corporation
By______________________________
Title___________________________
WANGTEK PUERTO RICO, INC.,
a Delaware corporation
By______________________________
Title___________________________
-5-
<PAGE> 1
SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Sixth Amendment to Loan and Security Agreement ("Sixth
Amendment") is made as of July __, 1995 by and between SANWA BUSINESS CREDIT
CORPORATION ("Lender") and Rexon Incorporated, a Delaware corporation
("Rexon"), Rexon/Tecmar, Inc., a California corporation, Sytron Corporation, a
Delaware corporation ("Sytron"), WangDAT, Inc., a California corporation, and
Wangtek, Inc., a California corporation (each a "Borrower", collectively, the
"Borrowers").
WHEREAS, Lender and Borrowers entered into a Loan and Security
Agreement dated as of October 5, 1994, as amended by the First Amendment to
Loan and Security Agreement dated as of October 17, 1994, the Second Amendment
to Loan and Security Agreement dated as of December 27, 1994, the Third
Amendment to Loan and Security Agreement dated as of March 24, 1995, the
Fourth Amendment to Loan and Security Agreement dated as of April 15, 1995, the
Fifth Amendment to Loan and Security Agreement dated as of May 15, 1995 and
that certain Waiver Letter dated June 28, 1995 from Bank to Borrowers
(collectively, the "Loan Agreement") pursuant to which Lender is making certain
loans or other credit facilities available to Borrowers upon the terms and
conditions set forth in the Loan Agreement and the related Ancillary
Agreements; and
WHEREAS, Borrowers have requested that Lender consent to the sale
of certain of the assets of Sytron Corporation to Arcada Software, Inc.
("Arcada") for the sum of Four Million Five Hundred Thousand Dollars, Lender
has agreed, subject to the terms and conditions herein, to consent to the sale
and to certain additional modifications and amendments to the Loan Agreement as
set forth in this Sixth Amendment.
NOW, THEREFORE, in consideration of the terms and conditions
herein, and of any loans or other credit facilities heretofore, now or
hereafter made to or for the benefit of Borrowers by Lender, the parties hereto
agree to the following amendments and modifications to the Loan Agreement:
1. CONSENT. Subject to (a) the receipt by Lender of the
proceeds of the sale in a cash amount equal to the outstanding amount of
advances made by Lender against the Accounts of Sytron as determined by Lender,
(b) the Borrowers' agreement that the financial covenants shall be adjusted as
set forth in Section 3 below, and (c) the full and satisfactory performance of
the terms and conditions contained in this Sixth Amendment, Lender hereby
consents to the sale of the assets of Sytron Corporation, with the assets to be
excluded from the sale as set forth on Exhibit A hereto, to Arcada for the sum
of Four Million Five Hundred Thousand Dollars and No/100 ($4,500,000.00), which
consent shall expire on July 31, 1995 if the sale transaction is not
consummated on or before that date.
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<PAGE> 2
2. AMENDMENTS TO LOAN AGREEMENT.
a. TOTAL FACILITY. The first sentence of the second paragraph
of Section 2.1 of the Loan Agreement is hereby amended and restated in its
entirety as follows:
"A revolving line of credit consisting of advances against Eligible
Accounts and Eligible Foreign Accounts with a subline letter of credit support
facility (the "Revolving Loan" in an aggregate principal amount not to exceed,
at any time outstanding, the lesser of (i) Twenty Three Million and No/100
Dollars ($23,000,000.00) or (ii) the outstanding amount of Collateral
Availability."
b. COLLATERAL AVAILABILITY. Effective August 23, 1995, the
second sentence of the second paragraph of Section 2.1 of the Loan Agreement is
hereby amended and restated in its entirety as follows:
". . . As used in this Agreement, Collateral Availability shall mean, and at
any particular time and from time to time, be equal to, the sum of up to
eighty percent (80%) of the net amount (after deduction of such reserves as
Lender deems proper and necessary) of Eligible Accounts, plus up to sixty
percent (60%) of the aggregate value of Eligible Foreign Accounts (after
deduction of such reserves as Lender deems proper and necessary), provided
that Collateral Availability as to Eligible Foreign Accounts shall not at
any time exceed Seven Million Five Hundred Thousand Dollars and No/100
($7,500,000)."
c. AFFIRMATIVE COVENANTS. Section 10.1(k) is hereby amended
and restated in its entirety as follows:
"(k) Guaranty. Provide Lender with and maintain in effect guaranties in
form and substance satisfactory to Lender and executed by each of Rexon
Europe, Inc., Rexon International Sales Corporation, Rexon International
Service Co., Rexon Singapore Pte, Ltd., Sytron U.K., Inc. and Wangtek Puerto
Rico, Inc.;"
3. FINANCIAL COVENANTS. Lender and Borrowers agree that upon
the sale of the Sytron assets and the receipt by Lender of Borrowers' monthly
financial report for the month ending July 2, 1995, that adjustments to certain
of the Financial Tests set forth in Section 10.1(a) of the Loan Agreement shall
be made, subject to approval by Lender of the new covenant amounts, in the
exercise of Lender's sole discretion. In no event, however, shall (a) Tangible
Net Worth be less than $10,900,000, (b) the ratio of Indebtedness minus
Subordinated Debt to Tangible Net Worth be greater than 5.50:1.00, (c)
quarterly Net Profit Before Taxes be less than ($4,300,000), or (d) Borrowers'
quarterly Net Profit Before Taxes be less than ($3,967,500).
4. REPRESENTATIONS AND WARRANTIES. Borrowers represent and
warrant as follows:
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<PAGE> 3
(a) Each of the representations and warranties contained in the
Loan Agreement is hereby reaffirmed as of the date hereof, each as if set forth
herein;
(b) The execution, delivery and performance of this Sixth
Amendment are within Borrowers' powers, have been duly authorized by all
necessary action, have received all necessary approvals, if any, and do not
contravene any law or any contractual restrictions binding on Borrowers;
(c) None of the assets being sold to Arcada are assets
belonging to any Borrower or Guarantor other than Sytron or Sytron U.K. Inc.,
and the sale of the Sytron assets shall not materially impair or affect the
business or operations of any Borrower or Guarantor other than Sytron or Sytron
U.K. Inc.
(d) This Sixth Amendment is a legal, valid and binding
obligation of Borrowers, enforceable against Borrowers in accordance with its
terms; and
(e) No event has occurred and is continuing or would result
from this Sixth Amendment which constitutes a Default under the Loan Agreement,
as amended and modified hereby, or under any other agreement to which any
Borrowers are a party.
5. CONDITIONS. The effectiveness of this Sixth Amendment is
conditioned upon the full satisfaction by Borrowers of each of the following
conditions or their waiver in writing by Lender:
(a) this Sixth Amendment and the Guarantor's Consent shall have
been executed by duly authorized signatories of the Borrowers and Guarantors
and delivered to Lender;
(b) The list of assets of Sytron to be transferred pursuant to
the sale shall be satisfactory to Lender in its sole discretion; and
(c) Lender shall have been paid, in immediately available
funds, the an amount equal to the outstanding amount of advances made by Lender
against the Accounts of Sytron.
6. MISCELLANEOUS. This Sixth Amendment shall be part of the
Loan Agreement, the terms of which are incorporated herein, and the breach of
any representation, warranty or covenant contained herein or the failure to
observe or comply with any term or agreement contained herein, shall constitute
a Default under the Loan Agreement and Lender shall be entitled to exercise all
rights and remedies it may have under the Loan Agreement and applicable law.
Borrowers agree to pay all costs, expenses and attorneys' fees incurred by
Lender in connection with the negotiation and preparation of this Sixth
Amendment and any other documents in connection herewith and in carrying out or
enforcing the terms of this Sixth Amendment. Lender is not waiving any rights
-3-
<PAGE> 4
under the Loan Agreement and, except as expressly provided herein or as
previously modified in a writing signed by Lender, all of the terms, covenants,
and conditions of the Loan Agreement remain unmodified and in full force and
effect. Capitalized terms used herein and not otherwise defined shall have the
same meaning as set forth in the Loan Agreement. This Sixth Amendment may be
executed in counterparts, which counterparts, when so executed and delivered,
shall together constitute but one original.
IN WITNESS WHEREOF, the parties hereto have executed this Sixth
Amendment to be effective as of the first date above written.
BORROWERS:
---------
REXON INCORPORATED, SYTRON CORPORATION,
a Delaware corporation a Delaware Corporation
By______________________________ By______________________________
Title___________________________ Title___________________________
REXON/TECMAR, INC., WANGDAT, INC.,
a California corporation a California corporation
By______________________________ By______________________________
Title___________________________ Title___________________________
WANGTEK, INC.,
a California corporation
By______________________________
Title___________________________
LENDER:
------
SANWA BUSINESS CREDIT CORPORATION
By_______________________________
Title____________________________
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<PAGE> 5
EXHIBIT A
ASSETS TO BE RETAINED BY SYTRON
-5-
<PAGE> 6
GUARANTORS' CONSENT
The undersigned Guarantors hereby acknowledge and consent to the foregoing
Sixth Amendment and reaffirm their respective guaranties, security agreements
and other documents executed by the undersigned in connection with the Loan
Agreement and agree that all such guaranties, security agreements and documents
are in full force and of effect.
"GUARANTORS"
REXON EUROPE, INC., a
Delaware corporation
By______________________________
Title___________________________
REXON INTERNATIONAL SALES CORPORATION,
a California corporation
By______________________________
Title___________________________
REXON INTERNATIONAL SERVICE CO.,
a Delaware corporation
By______________________________
Title___________________________
REXON SINGAPORE PTE LTD.,
a Singapore corporation
By______________________________
Title___________________________
-6-
<PAGE> 7
SYTRON U.K., INC.,
a corporation
By______________________________
Title___________________________
WANGTEK PUERTO RICO, INC.,
a Delaware corporation
By______________________________
Title___________________________
-7-
<PAGE> 1
ASSET PURCHASE AGREEMENT
by and among
REXON INCORPORATED
SYTRON CORPORATION
and
ARCADA SOFTWARE, INC.
<PAGE> 2
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT, is made and entered into as of July 25,
1995 (this "Agreement"), by and among ARCADA SOFTWARE, INC., a Delaware
corporation (the "Buyer") with its principal offices at 37 Skyline Drive,
Lake Mary, Florida, 32746, on the one hand, and SYTRON CORPORATION, a Delaware
corporation (the "Seller") with its principal offices at 134 Flanders Road,
Westboro, Massachusetts 01581 and REXON INCORPORATED, a Delaware corporation
and the record and beneficial owner of all of the issued and outstanding shares
of capital stock of the Seller (the "Parent") with its principal offices at One
Progress Plaza, Suite 2110, St. Petersburg, Florida 33701, on the other hand.
WITNESSETH:
WHEREAS, the Seller is engaged, in part, in the business of storage
management, backup and data management Software; and
WHEREAS, the Parent is the sole owner, of record and beneficially, of
all of the Seller's issued and outstanding shares of capital stock; and
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Seller desires to sell to the Buyer, and the Buyer desires to
purchase from the Seller, substantially all of the assets, property, business,
rights and goodwill of the Seller, all as more fully described in Section 2.1
and the Seller desire to cause the buyer to assume and the Buyer has agree to
assume from the Seller certain specified liabilities and obligations of the
Seller, all as more fully described in Section 2.3
NOW, THEREFORE, in reliance upon the representations, warranties and
agreements made herein and in consideration of the premises and covenant
wherein contained and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto, intending
to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS: RULES OF CONSTRUCTION
SECTION 1.1 DEFINITIONS: Except as otherwise specified or as the
context may otherwise require, in addition, to the capitalized terms defined
elsewhere herein, the following terms shall have the respective meanings set
forth below whenever uses in this Agreement:
"Accounts Receivable" as defined in Section 2.1(a)((xv)).
"Affiliates " means, with respect to any designated Person, any other
Person (a) directly or indirectly through one or more intermediaries,
controlling, or controlled by, or under direct or indirect common control with,
such designated Person, (b) which beneficially owns or holds 10% or more of any
class or equity interest of which is beneficially owned or held by such
designated Person, or (d) any other Person who is an officer or director such
Person or of any Subsidiary of such Person or any Person described in clause (a)
of this definition. For purposes of this definition, "control" (including with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person shall mean its Position, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of stock or other equity
interest or by contract or otherwise.
"Agreement" means this Asset Purchase Agreement s the same may be
amended from time to time in accordance with its terms.
"Assigned Contracts" as defined in Section 2.1(a)(v).
"Assumed Liabilities" as defined in Section 2.3.
"Assumption Agreement" means the Assumption Agreement, to be dated the
Closing Date, executed by the Buyer and the Seller, substantially in the form
of Exhibit A hereto.
"Balance Sheet" as defined in Section 4.5.
"Bill of Sale" means the Warranty Bill of Sale and Assignment, to be
dated the Closing Date, executed by the Seller, substantially in the form of
Exhibit B hereto.
2
<PAGE> 3
"Business Day" means any day which is not a Saturday, Sunday or a day
on which banking institutions in the State of Florida are authorized by law to
close.
"Business or Condition" of any Person, means the business, operations,
assets, properties, earnings, condition (financial or other) or reasonably
foreseeable prospects of such Person; provided that such term, when used
without reference to any particular Person, shall mean the Business or
Condition of the Seller.
"Buyer" as defined in the introductory paragraph of this Agreement.
"Claims" as defined in Section 2.1(a)(xiii)
"Closing" as defined in Section 3.2.
"Closing Date" as defined in Section 3.2.
"Code" means the Internal Revenue Code of 1986, as amended and the
rules and regulations promulgated thereunder.
"Computer Documentation" means all technical documentation pertaining
to the Computer Programs including, with limitation, any end-user manuals,
product specifications, algorithms, diagrams, bug lists, and electronic machine
readable versions of such manuals, product answer books and any and all other
related documentation.
"Computer Programs" as defined in Section 2.1(a)(xvi).
"Contract" as defined in Section 4.13.
"Contract Assignment" means the Assignment of Contracts, to be dated
the Closing Date, executed the Buyer and the Seller, substantially in the form
of Exhibit C hereto.
"Copyrights" as defined in Schedule 2.1(a)(x).
"Copyright Assignment" means the Copyright and Software Assignment,
to be date the Closing Date. executed by the Seller, substantially in form of
Exhibit D hereto:
"Damages" means any and all damages, losses, liability, obligation,
penalties, fines, claims, litigation, demands, defenses, judgments, suits,
proceedings, costs, disbursements or expenses ( including, without limitation,
attorneys' and experts' fees and disbursements) of any kind or of any nature
whatsoever (whether based in common law statue or contract; fixed or
contingent; known or unknown) suffered or incurred by a party hereto, its
officers, directors, employees, Affiliates, successors and assignees,
including, in the case of the Buyer, any transferee of an interest in any of
the Transferred Assets. "Damages" shall also included costs, expenses and
disbursements incurred in establishing the right to be indemnified thereunder.
"Employees" shall mean any former or current, active or inactive,
employee, officer, agent, consultant, independent contractor or subcontractor
of the Seller.
"Equipment" as defined in Section 2.1(a)(iii)
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" as defined in Section 2.2.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Governmental Body" means any Federal, state, municipal, local or
other governmental body, department, commission, board, bureau, agency or
instrumentality, political subdivision or taxing authority, domestic or
foreign.
3
<PAGE> 4
"Intellectual Property Rights" means (i) Patents, (ii) Know-How,
(iii) Copyrights, (iv) Trademarks, (v) Computer Programs and (vi) all other
intellectual; property rights, whether registered or not.
"Inventory" as defined in Section 2.1(a)(iv).
"Know-How" as defined in Section 2.1(a)(xi).
"Lease Assignment" means the Assignment and Assumption of Leases, to
be dated the Closing date, executed by the Seller and the Buyer, substantially
in the form of Exhibit E hereto.
"Leased Real Property" as defined in Section 2.1(a)(ii).
"Leases" as defined in Section 4.6.
"License Agreement" means the Arcada Software OEM Agreement to be
dated the Closing Date and entered into between the Parent and the Buyer,
substantially in the form of Exhibit F hereto.
"Lien or other Encumbrance" means any mortgage, lien (statutory or
other), pledge, assignment, deed of trust, hypothecation, adverse claim,
charge, security interest, option, right of first refusal, restrictive covenant
or other encumbrance any kind or nature, or any interest or title of any
vendor, lessor, lender or other secured party under any conditional sale,
capital lease, trust receipt or other title retention agreement or the signing
or filing of a financing statement covering any property.
"Materially Adverse", "Material Adverse Change"; "Material Adverse
Effect" means in, on or to, as appropriate, any Person, a material adverse
change in such Person's Business or Condition, a material adverse effect on
such Person's Business or Condition or an event which is materially adverse to
such Person's Business or Condition; provided, that any such term, when used
without reference to any particular Person, shall mean such change in or effect
on or event adverse to, as the case may be, the Seller.
"Non-Compete Agreement" means the Non-Compete Agreement, to be dated
the Closing Date, executed by the Buyer, the Seller and the Parent,
substantially in the form of Exhibit G hereto.
"Order" means any order, writ, injunction, decree, judgment, award,
determination, directive or demand of a court, arbitrator, tribunal or other
Governmental Body.
"Owned Real Property" as defined in Section 2.1(a)(i).
"Parent" as defined in the introductory paragraph of this Agreement.
"Patent Assignment" means the Patent Assignment, to be dated the
Closing Date, executed by the Seller, substantially in the form of Exhibit H
hereto.
"Patents" as defined in Section 2.1(a)(viii).
"Permits" means all permits, licenses, orders, approvals, franchises,
registrations and any other authorizations or any Governmental Body.
"Person" means any individual, corporation , partnership, limited
liability company, joint venture, association, trust, unincorporated
organization, entity of any Governmental Body or political subdivision thereof
or any other entity or organization.
"Purchase Price" as defined in Section 3.1.
"Records" as defined in Section 2.1(a)(vi).
"Requirement of Law" means any statute, law, ordinance, rule,
regulation, order, decree, judicial or administrative decision or directive.
"Retained Liabilities" as defined in Section 2.4.
4
<PAGE> 5
"Seller" as defined in the introductory paragraph of this Agreement.
"Subsidiary" with respect to any Person, any corporation more than
50% of the voting stock of which is at the time owned by such Person and/or one
or more of its other subsidiaries.
"Tangible Personal Property" means, collectively, the Equipment, the
Inventory and the Records.
"Taxes" means all taxes of any kind, including, without limitation,
those on, or measured by or referred to as income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium,
environmental, customs duties, capital stock, franchise, profits, withholding,
social security, unemployment, disability, real property, personal property,
ad valorem, import or export duties, sales, use, transfer, registration, value
added, alternative, estimated or any other tax of any kind whatsoever,
including any Interest, penalty, fine, or addition thereto, whether disputed or
not of any Federal, state, local or foreign Governmental Body or other taxing
authority.
"Tax Returns" means all returns, reports, estimates, declarations,
information returns and statements of any nature regarding Taxes for any
period, including any schedule or attachment thereto, and including any
amendment thereto.
"Trademarks" as defined in Section 2.1(a)(ix).
"Trademark Assignment" means the Trademark Assignment, to be dated the
Closing Date, executed by the Seller, substantially in the form of Exhibit I
hereto.
"Transaction Documents" means this Agreement, the Assumption
Agreement, the Bill of Sale, the Contract Assignment, the Copyright Assignment,
the Lease Assignment, the License Agreement, the Non-Complete Agreement, the
Patent Assignment, and the Trademark Assignment.
"Transferred Assets" as defined in Section 2.1(a).
SECTION 1.2 RULES OF CONSTRUCTION. The following provisions shall be
applied wherever appropriate herein:
(a) "herein", "hereby", "hereunder", "hereof" and other equivalent
words shall refer to this Agreement as an entirety and not solely in the
particular portion of this Agreement in which any such word is used;
(b) all definitions set forth herein shall be deemed applicable
whether the words defined are used herein in the singular or the plural;
(c) wherever used herein, any pronoun or pronouns shall be deemed to
include both the singular and plural and to cover all genders;
(d) all accounting terms not specifically defined herein shall be
construed in accordance with GAAP,
(e) this Agreement shall be deemed to have been drafted by both the
Seller, the Parent and the Buyer and neither this Agreement nor any Transaction
Document or other agreement, document or instrument referred to herein or
executed and delivered in connection herewith shall be construed against either
party as the principal drafts person hereof or thereof;
(f) all references or citations in this Agreement to statutes or
regulations or statutory or regulatory provisions shall, when the context
requires, be considered citations to such statutes, regulations or provisions as
in effect from time to time, including any successor statutes, regulations or
provisions directly or indirectly superseding such statutes, regulations or
provisions;
(g) any references herein to a particular Section, Article, Exhibit or
Schedule means a Section or Article of, or an Exhibit or Schedule to, this
Agreement unless another agreement is specified; and
(h) the Exhibits and Schedules attached hereto are incorporated herein
by reference and shall be considered part of this Agreement.
ARTICLE II
TERMS OF THE TRANSACTION
5
<PAGE> 6
SECTION 2.1 TRANSFER OF PROPERTY, ASSETS AND BUSINESS. (a) On and
subject to the terms and conditions of this Agreement, at the Closing, the
Seller shall sell, grant, convey, transfer, assign and deliver to the Buyer,
and the Buyer shall purchase, acquire and accept from the Seller, all of the
Seller's right, title and interest In, to and under the properties, assets,
rights, interests, claims, goodwill, backlog and business of the Seller (other
then the Excluded Assets) of every kind, character and description, whether
tangible or intangible, vested or unvested, whether real, personal or mixed,
whether accrued, contingent or otherwise, and wherever located and whether or
not any of such assets is reflected on the books and records of the Seller or
has any value for accounting purposes and whether or not described herein or in
any of the Exhibits or Schedules delivered or to be delivered hereunder, as the
same shall exist on the Closing Date (collectively, the "Transferred Assets")
free and clear of any Liens or Other Encumbrances (except as set forth on
schedule 4.7), including specifically, but without limiting the generality of
the foregoing:
(i) all of the real property (including, not limited to, the
plants, buildings and improvements thereon and the easements, rights of way and
other similar interests in real property and appurtenances belonging or
appertaining thereto of third parties (the "Owned Real Property");
(ii) all of the real property (including, but not limited to,
the plants, buildings and improvements thereon and those leased properties
described in Schedule 2.1(a)(ii) (hereto), in any case, leased by the Seller,
together with all rights and privileges under such leases or other similar
agreements (the "Leased Real Property");
(iii) all tangible assets and properties and fixed assets,
including but not limited to machinery and equipment, tooling, jogs, dies,
tools, operating supplies, furniture, office equipment, data processing
equipment, furnishings, parts, spare parts, fixtures, vehicles, automobiles,
leasehold improvements, goods, computers, computer peripherals, magnetic and
magneto-optical storage media and other similar items of personal property,
whether or not physically located on the Owned Real Property or on the Leased
Real Property (the "Equipment") including, but not limited to, those listed on
Schedule 2.1(a)(iii) hereto;
(iv) all inventories, including disks, finished products,
work-in-process, materials, parts, accessories and related products and
supplies wherever located, (the "Inventory") including, but not limited to,
those described in Schedule 2.1(a)(iv) hereto;
(v) all rights in and to (A) all contracts and agreements for
the sale or purchase of goods or services, or both, entered into by the Seller
in connection with the operation of its business, and the rights attributable
to portions of contracts, agreements and purchase orders for the sale or
purchase of goods or services, or both, including unpaid receivables arising in
connection with such contracts, agreements and purchase orders, (B) all leases
for the use of real or personal property, or both, entered into by the Seller,
and the rights attributable to portions of leases for the use of personal
property, including master leases pertaining to vehicles and other personal
property, (C) all technology transfer agreements, (D) all other contacts and
agreements entered into by the Seller of whatever nature, and (E) all purchase
orders for the sale of goods or services in each case (A) through (D) as set
forth in Schedule 2.1(a)(v) (collectively, the "Assigned Contracts");
(vi) all originals (except seller shall retain all originals
of tax returns and related tax information), or to the extent originals are not
available, copies, of all papers, sales and business files and records,
property records, contract records, certificates, Accounts Receivable records,
product specifications, drawings correspondence, engineering, maintenance,
operating and production records, marketing records, personnel records, mailing
records, credit records of customers, invoices, supplier and customer lists and
all other accounting, financial and business records and documents, whether
maintained in electronic or physical form (the "Records");
(vii) to the extent transfer is permitted under applicable law
or regulation, all Permits, held by the Seller which are required in the
operation of its business or in the use of any of the Transferred Assets;
(viii) all patents, patent rights (including, without
limitation, claims against third persons for infringement whether or not
heretofore asserted), patent applications, patent registrations and recordings
and foreign counterparts thereof, including all divisions, patents of addition,
continuations extensions, reissues, confirmations, importation patents and
registration patents of all patents and patent applications and related patents
and the inventions disclosed therein (the "Patents"), including but not
limited to those listed in Schedule 2.1(a)(viii) hereto;
(ix) the common law trademarks, trademark applications,
trademark registrations, trade names, service marks, trade styles, trade dress
and such unregistered rights as may exist through use and foreign counterparts
thereof owned or used by the Seller (the "Trademarks"), including but not
limited to those listed in Schedule 2.1(a)(ix) hereto:
(x) all copyrightable works and the copyrights, copyright
applications, pending applications, registrations, supplemental registrations
and recordings, owned or used by the Seller (the "Copyrights"), including, but
not limited to, those listed in Schedule 2.1(a)(x) hereto;
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(xi) all inventions, interests in inventions, discoveries,
trade-secrets, designs, improvements, formulae, manufacturing methods,
engineering concepts, practices, processes, technical data, product development
data, research data, notebooks, specifications, or methods and Know-How,
whether or not patentable, and all other proprietary information or other
technical or business information, whether or not a secret and whether or not
reduced to writing (the "Know-How");
(xii) all other intangible property rights or claims owned or
claimed by the Seller, including goodwill which is related to the operation of
the Seller's business or the Transferred Assets or the Assumed Liabilities or
the use of the names Sytron, Sytos and all other names used by the Seller and
all derivations thereof, including all logos or other designs using said names
or derivatives;
(xiii) all prepayments, prepaid items, unbilled costs,
deposits, claims in bankruptcy and chooses in action, indemnification
agreements with and indemnification rights against third parties, and other
claims arising out of the Seller's business or the Transferred Assets,
including all rights under express or implied warranties (the "Claims");
(xiv) all marketable securities and cash, cash equivalents in
transit, in hand or in bank or other accounts:
(xv) all accounts receivable for products sold or services
rendered and all other notes or accounts receivable whether due from customers,
vendors or suppliers and all proceeds of the foregoing (the "Accounts
Receivable"), including but not limited to those listed on Schedule 2.1(a)(xv)
hereto;
(xvi) all computer applications, files, tools, utilities,
software including source code, object code, program architecture, flow
diagrams, data compilations, formula and algorithm flow charts and notes
related thereto, programs, including without limitation, all versions and
releases thereof (including foreign versions), and all data, databases and
documentation, whether electronically or physically maintained, which in any
case are (x) owned or used under a license and (y) used by the Seller in
connection with its business and whether now in existence or in the development
stage (the "Computer Programs") including but not limited to those set forth in
Schedule 2.1(a)(xvi) hereto, and all Computer Documentation;
(xvii) all other properties of the Seller of every kind,
character or description owned used and/or held for use in connection with the
Seller's business wherever located and whether or not similar to the assets set
forth elsewhere in the Section 2.1(a), but excluding the Excluded Assets.
(b) Notwithstanding Section 2.1(a), to the extent the sale, grant,
conveyance, transfer, assignment or delivery of any of the Transferred Assets
may be prohibited, restricted or delayed pursuant to any provision or
requirement of any applicable law, rule or regulation or other Requirement of
Law or may give rise to any right on the part of any other party thereto not to
perform or any of the Assigned Contracts is not assignable with the consent of
another party or may release any such party from any of its obligations
thereunder, this Agreement shall constitute an agreement to sell, grant,
convey, transfer, assign or deliver such Transferred Assets and such
agreements, leased and contracts as soon as practicable following the
compliance by the Seller and the Buyer with such law, rule or regulation or
other Requirement of Law or the obtaining of any necessary consent or otherwise
and the Seller, the Buyer and the parent agree to use their reasonable best
efforts to obtain the consent of any third party to the assignment of any of
the Assigned Contracts to the Buyer promptly after the Buyer in any reasonable
arrangement designed to provided the Buyer with the benefits intended to be
assigned to the Buyer, provided however that from the Closing Date to the date
such transfer or assignment is effected, the Seller and the Parent shall, to
the extent permitted by applicable law, rule or regulation, or other
Requirement of Law make available to the Buyer the economic benefits and
practical benefits of such asset.
SECTION 2.2 EXCLUDED ASSETS. Notwithstanding the foregoing, the
Transferred Assets shall not include any of the following assets and property
(collectively, the "Excluded Assets"), which are to be retained by the Seller:
(a) the corporate seal, minute books, stock books, or other records
having to do with the corporate organization of the Seller;
(b) the rights which accrue or which will accrue to the Seller under
this Agreement, the other Transaction Documents or the other agreements
executed in connection herewith or therewith;
(c) the Shares of capital stock of Sytron U.K., Inc.;
(d) uncapitalized software costs carried on the financial statements
of the Seller in accordance with FASB I86;
(e) the assets set forth on Schedule 2.2(e) hereto; and
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(f) the originals of all tax filings, all tax returns and tax-related
information concerning the Seller.
SECTION 2.3 ASSUMPTION OF LIABILITIES. The Buyer shall not assume,
undertake to pay, perform or discharge any of the Seller's liabilities or
obligations other than the following obligations and liabilities of the Seller
as of the Closing Date all of which are hereinafter referred to collectively as
the "Assumed Liabilities"), all of which the Buyer will assume and pay
discharge or perform, as appropriate, from and after the Closing Date in
accordance with the provisions of the Assumption Agreement:
(a) the obligations of the Seller under the Assigned Contracts
accruing from and after the Closing Date;
(b) the liabilities and obligations specifically set forth on Schedule
2.3;
(c) an amount not to exceed the first $100,000 of any payroll,
vacation pay and similar items resulting directly from the termination of
Employees of the Seller; and
(d) an amount of damages not to exceed the amount reserved on the
Balance Sheet in respect of repair work, replacement of inventory and related
support services based upon warranties;
Schedule 2.3 sets forth, with respect to each item shown, the name of
the creditor, the address of the creditor, the amount owed and the due date.
Nothing contained in this Agreement or the Assumption Agreement shall require
the Buyer to pay, perform or discharge any liabilities assumed hereunder so
long as it shall in good faith contest or cause to be contested the amount or
validity thereof.
SECTION 2.4 LIABILITIES NOT ASSUMED. Other than the Assumed
Liabilities specifically assumed under Section 2.3 the Buyer shall assume no
Damages, liability, obligation, claim, demand, debt, judgment, order, duty or
responsibility of any kind or nature, and the Buyer shall not be deemed to have
assumed any liability, obligation, claim, demand, debt, judgment, order, duty
or responsibility of any kind or nature of the Seller, or relating to the
Transferred Assets, whether based in common law or statute, or arising under
contract or otherwise, known or unknown, fixed or contingent, real or
potential, tangible or intangible, asserted or unasserted, and whether now
existing or hereafter arising, each of which shall be retained by the Seller
(collectively, the "Retained Liabilities"). Without limiting the generality of
the foregoing, the Buyer shall not be deemed to assume, nor shall it assume the
Damages liabilities obligations, claims, demands, debts, judgments, orders,
duties or responsibilities based upon, arising out of or relating to:
(a) a violation of any Requirement of Law by the Seller, including any
such liability which may arise in connection with agreements, contracts,
commitments or others for the sale of goods or services by the Seller;
(b) any action, suit or proceeding to which the Seller is a party, or
to which any of its assets, properties or business including the Transferred
Assets) is subject, which is instituted on or before the Closing or which is
instituted after the Closing;
(c) any liabilities or claim of any nature or any incident, act,
omission or circumstance occurring before or after the Closing arising out of
or related to the Seller business or the ownership of the Transferred Assets on
or prior to the Closing, including any claim for the breach of any express or
implied product warranty or any similar claim that relates to any product
manufactured or sold by the Seller, provided, however, the Buyer shall assume
the liabilities set forth in Section 2.3 (d).
(d) franchise, income or accumulated earnings or other Taxes of the
Seller (including any Tax due to recapture of any tax credits or any
depreciation pursuant to any applicable sections of the Code) or any Federal or
state income or franchise Taxes, or documentary stamps, conveyance taxes, sales
taxes, transfer taxes or other similar charges incurred by the Seller on or as
a result of the transfer of the Transferred Assets to the Buyer or any other
transaction contemplated by this Agreement or the other Transaction Documents;
(e) any recapture of depreciation or investment tax credit to which
the Seller may be subjected as a result of, or the amount of any Federal, state
or local income, gross receipts, conveyance or transfer tax resulting from the
sale of the Transferred Assets or any other transaction contemplated by this
Agreement or the other Transaction Documents;
(f) the fees, charges and expenses of any Person for financial, legal,
finding, brokerage, investment banking or other services rendered to the
Seller, the Parent or its Affiliates in connection with the transactions
contemplated by this Agreement or otherwise;
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(g) any liabilities or Damages for any pension or severance or
employment agreements or obligations or liabilities with respect to any of the
Seller's employees (past or present); provided, however that the Buyer agrees
to assume the liability set forth in Section 2.3 (c).
(h) any liabilities or Damages for any debt for money borrowed of the
Seller, any overdrafts of accounts by the Seller or any accounts payable for
goods and services received by the Seller;
(i) any liabilities or Damages arising out of any claims or causes of
action asserted by any Governmental Body or any other Person, arising from any
condition in existence on or before the Closing Date on any of the leased Real
Property or the Owned Real Property;
(j) any liabilities or Damages arising out of or in connection with
any Pension Plan, Tax Qualified Plan, whether arising before, on or after the
Closing Date and any liabilities in connection with any employee benefit plan
as defined under ERISA; or
(k) any liabilities of the Seller to any Affiliates or any other
inter-company items.
(l) all liabilities of the Seller set forth on Schedule 2.4.
ARTICLE III
THE PURCHASE PRICE; CLOSING
Section 3.1 Purchase Price. The transferred assets shall be sold,
assigned, granted, transferred, conveyed and delivered by the Seller and shall
be purchased, acquired and accepted by the Buyer for an aggregate purchase price
of $4,500,000.00 (the "Purchase Price"). The Purchase Price shall be paid by
the Buyer to the Seller as follows:
(a) on the Closing date, by certified check or wire transfer of
immediately available funds to an account designated by the Seller and approved
by Sanwa Business Credit Corporation.
SECTION 3.2 THE CLOSING. Subject to the terms and conditions set
forth herein, the closing of the sale and purchase of the Transferred Assets and
the other transactions contemplated hereby (the "Closing") shall be held at a
location and time agreeable to the parties. The time and date of Closing is
herein called the "Closing Date" All transactions contemplated hereunder to
occur on the Closing Date shall be deemed to have occurred simultaneously at
12:01 am on the Closing Date.
SECTION 3.3 INSTRUMENTS OF CONVEYANCE AND TRANSFER: POSSESSION. In
order to effectuate and evidence the sale, grant, conveyance, transfer,
assignment and delivery of the Transferred Assets as contemplated by Section
2.1, the Seller shall, at the Closing: (a) execute and deliver to the Buyer
the Bill of Sale : (b) execute and deliver to the Buyer warranty deeds of
conveyance or deeds of trust, if any; (c) execute and deliver to the Buyer a
Lease assignment for the Leases; (d) execute and deliver to the Buyer a Contract
Assignment for the Assigned Contracts; (e) deliver to the Buyer such consents as
are required to the Lease Assignments and the Contract Assignments from the
landlords or other persons required by the Leases and Assigned Contracts, by any
other agreement or by law; (f) execute and deliver to the Buyer a Trademark
Assignment for the Trademarks; (g) execute and deliver to the Buyer a Patent
Assignment. for the Patents; (h) execute and deliver to the Buyer a Copyright
Assignment for the Copyrights; and (i) execute and deliver to the Buyer such
other bills of sale, assignments, endorsements, powers of attorney, and other
good and sufficient instruments and documents of transfer and assignment, all
dated the Closing Date, and in a form satisfactory to the Buyer as shall be
necessary and effective to transfer and assign to, and further vest in, the
Buyer, all of the Transferred Assets. With respect to any Transferred Assets
that cannot be delivered to the Buyer because they are in possession of third
parties, the Seller shall give all necessary instructions to the party in
possession thereof, with copies thereof to the Buyer, that all of the Seller's
right, title and interest in and to the same have been vested in the Buyer and
that same are to be held for the Buyer's exclusive use and benefit.
SECTION 3.4 INSTRUCT OF ASSUMPTION. In order to effectuate the
assumption of the Assumed Liabilities contemplated by Section 2.3, the Buyer
shall execute and deliver to the Seller at Closing the Assumption Agreement.
SECTION 3.5 FURTHER ASSURANCES. From time to time, pursuant to the
request of the Buyer delivered to a Seller after the closing Date, the Seller,
at the Seller's expense, shall execute, deliver and acknowledge such other
instruments and documents of conveyance and transfer and shall take such other
actions and shall execute and deliver such other documents, certifications and
further assurances as the Buyer reasonably may request in order to vest and
confirm more effectively in the Buyer title to or to put the Buyer more fully
in legal possession of, or to enable the Buyer to use, any of the Transferred
Assets, or to better enable the Buyer to complete, perform or discharge any of
the Assumed Liabilities or to obtain or maintain the Intellectual Property
Rights or otherwise to carry out the purposes and intent of this Agreement
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SECTION 3.6 TAX ALLOCATION. An allocation of the Purchase Price shall
be arrived at by arm's length negotiation between the Buyer and the Seller
following the Closing Date and shall be consistent with the requirement of
Section 1060 of the Code and the regulations thereunder. The Buyer, the Seller
and the Parent agree that such allocation shall be as set forth on Schedule 3.6.
The Buyer, the Parent and the Seller agree to report this transaction for tax
purposes, including the timely filing of Internal Revenue Service Form 8594 and
any other required forms in accordance with such allocation and to defend such
allocation before, and not take any positions that are inconsistent with such
allocation before any Governmental Body charged with the collection of Taxes, or
in any judicial proceeding.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE PARENT
The Seller and the Parent, jointly and severally, represent and
warrant to the Buyer that as of the date hereof and, except as otherwise
specifically noted, at all times up to and as of the Closing Date, that:
SECTION 4.1 ORGANIZATION: AUTHORITY. (a) Each of the Seller and
the Parent is a corporation duly organized, validity existing and in good
standing under the laws of the state of its incorporation. The Seller is a
wholly-owned subsidiary of the Parent. Except as set forth on Schedule 4.1,
the Seller is not required to be qualified or licensed to do business as a
foreign corporation in any jurisdiction by reason of the ownership or leasing
of real property, the maintenance of offices, the warehousing of goods, the
conduct of its business activities, the nature of its business or otherwise.
The Seller is duly qualified or licensed to do business and in good standing in
each jurisdiction listed on Schedule 4.I. No proceedings for the liquidation
or dissolution of the Seller is pending or intended for the next twelve months.
(b) The Seller has all necessary legal right, power and authority
(including full corporate power and its authority), and possesses all Permits
necessary to own or to lease, and to operate all of its properties and assets
(including the Transferred Assets), and to carry on its business as it is now
being conducted. The Seller has all necessary legal right, power and authority
(including full corporate power and authority) to sell, convey, transfer assign
and deliver the Transferred Assets (subject to obtaining the consents set forth
on Schedule 4.3 relating to the assignment of the Assigned Contracts to the
Buyer, as contemplated by this Agreement, and to execute, deliver and perform
its obligations hereunder and under the other Transaction Documents to which it
is a party. The Parent has all necessary legal right, power and authority
(including full corporate power and authority) to execute, deliver and perform
its obligations hereunder and under the other Transaction Documents to which it
is a party.
SECTION 4.2 AUTHORIZATION OF TRANSACTION: NON-CONTRAVENTION: CONSENTS.
(a) The board of directors and shareholders of the Seller and the board of
directors of the Parent have duly authorized and approved the transactions
contemplated hereby, and each of the Seller and the Parent has taken all action
required by law, its certificate of incorporation, its by-laws or otherwise to
authorize and to approve the execution, delivery and performance of this
Agreement, the other Transaction Documents to which it is to be a party and the
documents, agreements and certificates executed and delivered by it or to be
executed and delivered in connection herewith and therewith. This Agreement is,
and each other Transaction Document to which the Seller and the Parent is to be
a party, when executed and delivered by the Seller and the Parent at the Closing
will be duly executed and delivered by the Seller and the Parent, as the case
may be, and shall constitute a valid and legally binding obligation of the
Seller and the Parent, as the case may be, enforceable against the Seller and
the Parent, as the Seller and the Parent, or who will execute on behalf of the
Seller or the Parent any other Transaction Document or other documents,
agreements and certificates in connection herewith or therewith, have been duly
authorized to do so by all necessary corporate or other action.
(b) Except as set forth on Schedule 4.2, neither the execution and
delivery of this Agreement or the other Transaction Documents, nor the
consummation of the transactions contemplated hereby and thereby on the terms
and subject to the conditions hereof and thereof, will (i) conflict with or
result in any violation of or constitute a breach of or give rise to a right of
termination or cancellation of any of the terms or provisions of, or result in
the acceleration of any obligation under, or constitute a default under any
provision of the certificate of incorporation or by-laws of the Seller or the
Parent or any Contract including, without limitation, the IBM license
agreement, the Gazelle agreement, or any other mortgage, bond, indenture,
agreement, collective bargaining agreement, Permit or other instrument or
obligation to which the Seller or the Parent is a party or to which it is or
any of the Transferred Assets or other assets or properties used by it in the
operation of its business are subject or bound; (ii) result in the creation of
any Lien or other Encumbrance upon any of the Transferred Assets or any other
assets or property of the Seller or the Parent pursuant to the terms of any
such Contract or other mortgage, bond, indenture, agreement, Permit or other
instrument or obligation; (iii) violate any judgment, Order, injunction, decree
or award of any court, administrative agency, arbitrator or Governmental Body
against or affecting or binding upon, the Seller, the Parent, any of the
Transferred Assets or upon the securities or other properties or business of
the Seller or the Parent; or iv) constitute a violation by the Seller or the
parent of any law, rule, regulation or other requirement of Law of any
jurisdiction as such law, rule,
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regulation or other Requirement of Law relates to the Seller, the Parent, its
business or any of the Transferred Assets. Neither Seller nor Parent is a
party to any contract, agreement or arrangement with any other person of the
nature of Section 6.5 hereof with respect to Seller, Seller's business or the
Transferred Assets.
SECTION 4.3 CONSENTS AND APPROVAL. Except only as set forth on
Schedule 4.3, no approval, consent, waiver or authorization of, or
registration, declaration or filing with, exemption by or any notice to any
Governmental Body or other Person is required (a) for or in connection with the
valid execution and delivery by the Seller or the parent of this Agreement or
the other Transaction Documents to which it is a party or the consummation by
the Seller or the parent of the transactions contemplated hereby or thereby,
including without limitation, the assignment of all Assigned Contracts or
Leases, (b) for or in connection with the sale, transfer, assignment,
conveyance, or delivery of the Transferred assets to the Buyer or the
assumption of the Assumed Liabilities by the Buyer or (c) as a condition to the
legality, validity or enforceability as against the Seller or the Parent of
this Agreement or the other Transaction Documents t which it is t be a party.
A complete list of all required comments, approvals, filings, notification and
registrations to the transactions contemplated by this Agreement and the other
Transaction Documents is set forth on Schedule 4.3 (including under any
Assigned Contracts, Leases, or Permit) or (c) in connection with the operation
by the Buyer of the Seller's business following the closing as conducted on the
date hereof.
SECTION 4.4 SUBSIDIARIES: INTERESTS IN OTHER ENTITIES. Except for
such Sytron U.K., Inc., the Seller does not own of record or beneficially,
directly or indirectly, (i) any share of capital stock or securities of any
other corporation or (ii) any participating interest or equity interest in any
partnership, joint venture, limited liability company or other non-corporate
business enterprise. The Seller does not control, directly or indirectly, any
other entity. Sytron U.K., Inc. has not assets or liabilities and does not
conduct any business, except any intercompany accounts.
SECTION 4.5 FINANCIAL STATEMENTS. The Seller has furnished the Buyer
with true and complete copies of the (unaudited) financial statements of the
Seller for the period ended July 2, 1995. including a balance sheet and the
related statement of income for the period then ended. The unaudited balance
sheet of the Seller as of July 2, 1995, a copy of which is attached as Schedule
4.5, is hereinafter referred to as the "Balance Sheet." Such financial
statement (a) are correct and complete and have been prepared in accordance
with the books and records of the Seller, (b) have been prepared on a
consistent basis throughout the period covered thereby, (c) reflect and
provide adequate reserves in respect of all know liabilities of the Seller in
accordance with GAAP, including all known contingent liabilities as of its
respective dates, and (d) present fairly the financial condition of the Seller
at such dates and the results of its operations for the period then ended. The
transactions and other revenues reflected on such financial statement and the
books and records of the Seller represent valid, bona fide transactions which
have arisen from the business of the Seller.
SECTION 4.6 REAL PROPERTY. (a) Except as set forth on Schedule 4.6,
the Seller does not own, have legal or equitable title in, or have a leasehold
interest in, any real property.
(b) The Seller does not own, have legal or equitable title in any
owned Real Property.
(c) All of the Leased Real Property is listed and described on
Schedule 2.1(a)(ii) (including in such listing a description of each Lease
relating thereto). True and complete copies of all leases, agreements and
instruments granting any leasehold interests, rights, options or other
interests with respect to the Leased Real Property (the "Leases") have been
delivered to the Buyer. With respect to the Leases, mortgages and other
agreements referred to on Schedule 4.6(c), no current default or event of
default on the part of the Seller as lessee or as mortgagor, and, to the
knowledge of the Seller or any officer of the Seller, no default or event of
default on the part of the lessor, or mortgagee, under the provisions of any of
said Leases or agreements, and no event which with the giving of notice or
passage of time, or both, would constitute such default or event of default on
the part of the Seller, or to the knowledge of the Seller or any officer of the
Seller, on the part of any such lessor or mortgagee, has occurred and is
continuing unremedied or unwaived.
(d) There are no leases, subleases, tenancies, licenses or other
occupancy right affecting any portion of the Leased Real Property except as set
forth on Schedule 4.6(d), true and correct copies of which have been delivered
or made available to the Buyer.
(e) There are no environmental, zoning, land use regulation or other
legal proceedings instituted which would reasonably be excepted to have a
material adverse impact on the present use, occupancy or operation of any of
the Leased Real Property.
(f) The Seller has not entered into any subleases of the Leased Real
Property or granted any licenses or occupancy rights with respect to the Leased
Real Property.
(g) The plants, buildings and improvements owned or leased by the
Seller, and the operation, use or occupancy or maintenance thereof as now
conducted do not (i) contravene any fire, safety, environmental, use,
occupancy, zoning or building laws, ordinances, regulations or other
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Requirements of Law or (ii) violate any covenant, agreement or restriction, the
effect of which materially interferes with or prevents the continued use,
occupancy or operation of such properties for the purposes for which they are
now being used, or would materially affect the value thereof. All of the
plants, buildings, I improvements and equipment owned or leased by the Seller
is in good operating condition and in a state of reasonable maintenance and
repair to the extent necessary for their continued efficient operation.
(h) There exists no pending or, to the knowledge of the Seller or its
officers, threatened, condemnation, eminent domain or similar proceeding with
respect to, or which could affect, any Owned Real Property or any Leased Real
Property, including the plants, building or improvements thereon.
(i) The Seller has not received or have knowledge of, any notice or
request from any insurance company or other Person requesting the performance
of an work or alteration in respect of the Leased Real Property.
SECTION 4.7 TANGIBLE PERSONAL PROPERTY: ACCOUNTS RECEIVABLE.
(a) Except as set forth in Schedule 4.7, the Seller has good and marketable
title to all Transferred Assets, free and clear of any Liens or other
Encumbrances. All Liens or Other Encumbrances set forth on Schedule 4.7
(unless otherwise indicated) shall be satisfied or released or terminated in
full on or prior to the Closing Date. Schedule 4.7 is a true and complete list
of all liens or Other Encumbrances affecting the Transferred Assets. All items
of Equipment included in the Transferred Assets with a value over $1,000 are
described in the Schedules delivered pursuant to Section 2.1(a). Upon the sale
to the Buyer hereunder, the Buyer shall have good and marketable title to all
Transferred Assets, free and clear of all Liens or Other Encumbrances.
(b) All Tangible Personal Property (excluding the Inventory, which is
addressed in Section 4.7 (c)) currently are used, usable or useful to the
Seller in the ordinary course of its business consistent with past practice.
Schedule 4.7(b) contains a true and correct list of all leases of personal
property. All such property is being operated in conformity with all
applicable Requirements of law.
(c) Except as set forth in Schedule 4.7 (c), the Inventories are in
good condition, are used, usable or saleable by or useful to the Seller in the
ordinary course of its business consistent with past practice. Except as set
forth on Schedule 4.7 (c), the finished goods produced by the Seller and
included in the Transferred Assets are of good quality, free from defects and
conform to customary trade and governmental standards for marketable goods.
The Seller is not under any liability or obligation with respect to the return
of Inventory in the possession of wholesalers, retailers or other customers.
(d) Except as set forth in Schedule 4.7 (d), all Accounts Receivable
of the Seller is reflected properly on its books, are genuine and valid
receivable subject to no set-off or counterclaims, arose from valid sales and
bona fide transactions. Any payment on the Accounts Receivable made by any
obligor thereon shall be applied first to the trade accounts receivable of such
obligor outstanding for the longest period of time unless such obligor shall
have directed that the payment be applied to one or more specific trade
Accounts Receivable. Schedule 2.1(a)(xv) contains a true and correct list of
Accounts Receivable as of July 21, 1995 including the date of the invoice, the
aging, the account debtor and the amount owed. Except as set forth on Schedule
4.7 (d), the Accounts Receivable constitute all of the accounts receivable of
the business of the Seller. Except as set forth on Schedule 4.7(d), there is
not and will not be any liability of the Seller for any refunds, discounts,
rebates, allowances or returns in respect of product sold by the Seller. The
amount and face value shown on invoices and statements are actually and
absolutely owing to the Seller and are not contingent for any reason. Seller
gives no representation or warranty as to the collectability of the Accounts
Receivables.
(e) Those agreements or purchase orders described in Schedule 4.7(e)
constitute the Seller's backlog and indicate the dollar amount and quantities
of goods and services. The Seller gives no representation or warranty as to
the collectibility of such listed backlog. All such purchase orders and
agreements may be assigned and delegated to the buyer without the consent of
the other parties thereto.
SECTION 4.8 EMPLOYEES: LABOR MATTERS. (a) Set forth on Schedule 4.8
is a true and complete list of: (i) all contracts or agreements with any
director, officer or employee, or consultant of the Seller; (ii)) all Employees
of the Seller, including the title or job classification of each such person,
and a list of the names, positions and current salary rates of the such
Employees (iii) the officers and managers of the Seller, specifying the title
and job classification of each such person; and (iv) the directors of the
Seller. The Seller is not in default under any agreement or contract listed on
Schedule 4.8 and all such agreements and contracts are in full force and
effect, are valid and legally binding on the Seller and, to the best of the
Seller's knowledge, are valid and legally binding on the other parties thereto.
The Seller is current with respect to all wages, salaries, bonuses, expenses
and other amount payable to any of its Employees.
(b) Except as set forth on Schedule 4.8, the Seller is not a party to
any collective bargaining agreement with any labor organization. There is not
pending, or to the knowledgeable of the Seller threatened, any labor dispute,
strike or work stoppage or slow down involving the Employees of
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the Seller. There are no union organization efforts relating to the Employees
of the Seller or any representation question involving recognition as a
collective bargaining agent for any employees of the Seller. The Seller has
not been charged with any violation, nor are the Seller under investigation
with respect to claims of unfair labor practices or violations of the
Requirements of Law relating to health, safety and conditions of employment.
The Seller has complied with All Requirements of Law regarding employment and
employment practices and wages including, without limitation, payment of social
security and similar taxes and all occupational safety and health Requirements
of Law. The sale by the Seller of the Transferred Assets and the termination
of Employees does not implicate the requirements or regulations under the
Worker Adjustment and Retraining Notification Act, and the Seller is not
required to give employees advance notice of any "plant closing" or "mass
layoff".
SECTION 4.9 EMPLOYEE BENEFITS: ERISA (a) Except as set forth in
Schedule 4.9, the Seller does not maintain any employee benefit plan within the
meaning of Section 3(3) of ERISA or other profit-sharing, deferred
compensation, bonus, stock option, stock purchase, severance or employee
benefit plans or arrangements, including cafeteria plans. The Seller has never
maintained a Plan. The Seller is in full compliance with ERISA.
(b) With respect to all Plans, no liability to the PBGC has been
incurred by the Seller or any corporation or other trade or business under
common control with the Seller (as determined under Section 414(b) and (c) of
the Code) "Common Control Entity") on account of any termination subject to
Title IV of ERISA; no filing has been made by the Seller or any Common Control
Entity with the PBGC, and no proceeding has been commenced by the PBGC to
terminate any Pension Plan subject to Title IV of ERISA maintained or wholly or
partially funded by the Seller or any Common Control Entity.
(c) The Seller has no obligation to and have never maintained an Plan
which provides for continuing benefits or coverage for any participant or
beneficiary of a participant's after such participants termination of
employment, except as may be required by the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA") and at the expense of the
participant or the beneficiary of the participant.
(d) The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not (either alone or when taken
together with any additional or subsequent events) constitute and event that
will or may result in any payment upon a change of control or otherwise,
whereto of severance, accrued vacation or otherwise.
SECTION 4.10 COMPLIANCE WITH LAW: PERMITS. (a) The Seller is not in
violation of any term or provision of its corporate charter or by-laws. The
Seller is not in violation nor default under any Requirement Law of an
Governmental Body or any Order of any court, arbitrator or Governmental body
applicable to it or its properties which would have a Material Adverse Effect.
The Seller has not received, and there does not exist, any notice, action, suit,
hearing, charge or investigation to the effect that the Seller or the
Transferred Assets are, was or may be in violation of any Requirements of Law or
any Order of any court, arbitrator or Governmental Body.
(b) The Seller is duly licensed under all Requirements of Law and
possesses all licenses, clearances and Permits necessary or required to conduct
its business as now conducted. Set forth on Schedule 4.10 is a list of all
licenses and Permits which the Seller has obtained. Each such license and
Permit are currently valid and effective in accordance with its terms and there
is not any existing default or threatened termination, revocation or limitation
of any such Permits by the Governmental Body issuing, or authorizing the same.
No other Permits are necessary or required for the Seller to operate its assets
(including the Transferred Assets) or conduct its business in the ordinary
course. Except as set forth on Schedule 4.10, all such Permits may be
transferred to the Buyer without the approval or consent of the Government Body
issuing or authorizing the same.
SECTION 4.11 LEGAL PROCEEDINGS. (a) Except as set forth in Schedule
4.11, there is no (i) action, suit, claim, proceeding or investigation pending
or, to the knowledge of the Seller, the Parent or any officer of the Seller or
the Parent, threatened against or affecting the Seller or its assets or
properties (including the Transferred Assets or any Subsidiary), at law or in
equity, or before or by any Governmental Body, (ii) arbitration proceeding
relating to the Seller or any Subsidiary or its assets or properties or (iii)
governmental inquire pending or, to the knowledge of the Seller, the Parent or
any officer of the Seller or the Parent, threatened relating to or involving the
Seller, any Subsidiary, its assets or properties or the transactions
contemplated by this Agreement (including inquiries as to the qualification of
the Seller or any Subsidiary to hold or receive any Permit) and neither the
Seller, the Parent nor any officer of the Seller or the Parent knows of any
basis for any of the foregoing. Except as set forth on Schedule 4.11, none of
the actions, suits, claims, proceedings or inquiries listed on such Schedule,
either individually or in the Aggregate is likely to have an adverse effect on
(i) the Buyer's ability to use or operate any of the Transferred Assets in a
manner consistent with the Seller's operations, (ii) the Buyer's use of any of
the Transferred Assets for the purposes which they have been used by the Seller
or (iii) the Seller's ability to consummate the transactions contemplated hereby
or by any of the other Transaction Documents. Except as set forth on Schedule
4.11, there are no pending actions, suits, claims or proceedings brought by the
Seller, or any Subsidiary against others.
(b) The Seller is not in default with respect to any Order, writ,
injunction or decree known to or served upon the Seller or any Subsidiary of
any court or of any Governmental Body.
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SECTION 4.12 INTELLECTUAL PROPERTY. (a) Schedules 2.1(a)(viii), (ix),
(x), and (xvi) collectively sets forth a true and complete list of all Patents,
Trademarks, Copyrights, and Computer Programs presently owned or held by the
Seller. The Seller has the right to use all Intellectual Property Rights.
Except for those items listed on Schedule 4.12, the Seller does not own or use,
internally or externally, in its business as now conducted or as previously
conducted, other Intellectual Property Rights which if the Seller was unable to
use would have a Material Adverse Effect on the Seller's ability to commercially
use the Transferred Assets.
(b) Except as otherwise indicated on Schedule 4.12, all Patents,
Trademarks, and Copyrights of the Seller has been duly registered and filed in
or issued the Governmental Body in the jurisdictions indicated, all necessary
affidavits of continuing use have been filed, and all necessary maintenance
fees have been paid to continue all such rights in effect.
(c) Seller has taken reasonable steps to protect its proprietary,
confidential and trade secret rights regarding the Intellectual Property Rights
(and such steps include, at a minimum, having caused all current employees
(other than Eric Ertil) and independent consultants of such Seller to sign a
proprietary information agreement or employment agreement that includes an
assignment by the employee or such independent consultant to such Seller of all
rights and interests in any computer programs, inventions, discoveries,
improvements or written works or other such items and a continuing obligation
on the part of such employees or independent consultants not to disclose any
proprietary or confidential information or trade secret of such Seller), and no
such right has heretofore been assigned, transferred, licenses or otherwise
made available to any other Person by the Seller, except pursuant to licenses,
distribution agreements, and other contracts entered into (or granted) by the
Seller in the ordinary course of business.
(d) Schedule 4.12 sets forth a list of each and every Intellectual
Property Right license granted by the Seller to any other Person (other than
end-user licenses).
(e) To Seller's knowledge, the Seller is not infringing upon, or
otherwise violating, the rights of any Person with respect to any Copyright or
trade secrets or any Trademark, servicemark, trade name, Patent, patentable
subject matter or other proprietary right or Intellectual Property Right. The
Seller and the Parent have no notice or knowledge of any objection or claim
being asserted by any Person with respect to the ownership, validity,
enforceability or use of any such Patents, patentable subject matter,
Trademarks, trade names, service marks, Copyrights, applications, therefor,
trade secrets or other Intellectual Property Rights or challenging or
questioning the validity or effectiveness of any license relating to any such
right. No proceedings have been instituted or threatened against the Seller
alleging any such infringement or violation. Without limiting the generality
of the foregoing, no Person has any pending claim against the Seller alleging
any infringement upon, or violation of the rights of such Person with respect
to, any trade secret, Trademark, service mark, Copy right, Patent, patentable
subject matter or other proprietary right or Intellectual Property Right
relating to or arising out of any software or other product developed and/or
licensed by the Seller, including, without limitation, the Computer Programs.
(f) The Seller has not taken any actions which would have the effect
of (i) invalidating or waiving an Copyright or copyright protections to its
products and software programs (including the Computer Programs) or (ii)
invalidating or waiving any trade secret protections otherwise available to it.
(g) For all material Intellectual Property Rights that the Seller
uses, but does not own, the Seller is licensed to use such Intellectual
Property Rights, and Schedule 4.12 lists each such license, including the name
of the licensor and the title and date of the license agreement corresponding
to each license. No material portions of the Computer Program sold or licensed
by the Seller is licensed from other Persons except as set forth in Schedule
4.12. The Seller is not in default under any such license agreement. Except
as set forth on Schedule 4.12 each such license agreement may be assigned
without the consent of the other parties thereto.
(h) Upon the transfers and assignments provided for herein, the Seller
will have validly assigned and transferred to the Buyer all right, title and
interest in its Intellectual Property Rights, free and clear of all Liens or
Other Encumbrance.
(i) The Computer Programs perform in all material respects in
accordance with any warranty given to Seller's customers, and there are
currently no claims pending or threatened alleging a failure of any of the
Computer Programs to perform properly, other than claims submitted under
Seller's warranty.
(j) None of the Computer Programs or Intellectual Property Rights,
other than that incorporated in "Sytos", incorporates or uses any software code
or other intellectual property rights developed or owned by Purart, Inc. or its
affiliates. No further royalties or other amounts are payable by the Seller to
Purart in respect of "Sytos" and Purart has released and assigned to the Seller
all of its rights to any intellectual property rights it may have had in
"Sytos". The Seller's gross revenues for Sytos did not exceed $50,000 in the
prior twelve-month period.
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SECTION 4.13 CONTRACTS AND COMMITMENTS. The Seller has delivered to
the Buyer true and complete copies of all written contracts relating to
Intellectual Property Rights, Assumed Liabilities and all other material
contracts (including the Assigned Contracts) of the Seller now in effect to
which the Seller is a part or by which it or its properties or assets may be
bound or affected and all of which are described in reasonable detail or
otherwise referred to on Schedule 4.13 (the "Contracts"). No default, alleged
default or anticipatory breach exists on the part of the Seller or, to the best
knowledge of the Seller or any of its officers, on the part of any other party,
under any Contract. There are no material agreements or arrangements, whether
written or oral, of the parties relating to any Contract (including waivers)
that have not been set forth on Schedule 4.13. Each such Contract is legal,
valid, binding and enforceable against the parties thereto in accordance with
its terms. The Seller is not a party to any written or oral contract or
commitment which could materially adversely affect the Transferred Assets.
Except as set forth on Schedule 4.13, the Seller nor any Subsidiary is not a
party to any written or oral:
(a) agreements, contracts or commitments not made in the ordinary
course of business consistent with past practice, other than this Agreement and
the other Transaction Documents;
(b) employment or consulting contract which is not terminable without
cost or other liability to the Seller, or an successor thereof, upon notice of
30 days or less, other than those listed on Schedule 4.8.
(c) contract or collective e bargaining agreement with any labor
organization or union or other representative of employees.
(d) bonus, pension, profit-sharing, retirement, stock purchase, stock
option, incentive compensation, hospitalization, insurance or similar plan,
contract or understanding provided for employee benefits.
(e) lease with respect to any property, real or personal, whether as
lessor or lessee other than those listed on Schedules 4.6 or 4.7;
(f) agreement contract or commitment for the purchase of real
property, equipment or fixed assets which involve, in the aggregate, more than
$10,000 or relating to computer software licensing or data processing services;
(g) insurance contract other than those listed on Schedule 4.18;
(h) representative, sales agency, distributorship, franchise, dealer
or advertising agreement, contract or commitment;
(i) agreement or indenture providing for the creation, incurrence or
assumption of any indebtedness for borrowed money or lending of money or under
which the Seller has advanced or agreed to advance money;
(j) agreement or indenture for the mortgaging or pledging of, or
otherwise placing a Lien or Other Encumbrance on, any asset, property or right
of the Seller including the Transferred Assets;
(k) guaranty (however designated) of an obligation for borrowed money
or otherwise of any obligations of an other Person;
(l) agreement, contract, commitment or arrangement which limits or
restraints the Seller, or any successor, to compete or operate any business in
any location or any other non-compete or confidentiality agreement;
(m) agreement, contract or commitment concerning a partnership or
joint venture or with any Affiliate; or
(n) any other material contract, agreement or commitment not otherwise
described in (a) through (m) above.
Except for the consents and approvals set forth on Schedule 4.3 no
Assigned Contract requires the consentor approval of any party to its
assignment to the Buyer in connection with the transactions contemplated hereby
and after the assignment thereof each such Assigned Contract will continue to
be legal, valid and binding enforceable in accordance with its terms after such
assignment. The sale of the Transferred Assets and the assignment of the
Assigned contract pursuant to this Agreement will not result in the termination
of any Contract under the express terms thereof, and will not bring into
operation any other provision thereof including, without limitation, the
payment of a penalty or other charge nor result in a breach or default
thereunder.
SECTION 4.14 BANK ACCOUNTS: POWERS OF ATTORNEY. Set forth on schedule
4.14 is a true and complete list of (a) the name of each bank or other financial
institution or fiduciary with which the Seller has an account demand deposit,
time deposit or safe deposit box, the identifying
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numbers or symbols thereof, and the name of each Prison authorized to draw
thereon or to have access thereto, and (b) the name of each Person, if any,
holding any power of attorney from the Seller and a summary statement of the
terms thereof.
SECTION 4.15 CONDUCT OF BUSINESS. Except as set forth on Schedule
4.15, since the date of the Balance Sheet, the Seller has conducted its business
in the ordinary course consistent with past practice and has maintained the
Transferred Assets in at least such order and condition as is necessary to
continue so to conduct its business, and has not:
(a) incurred any material obligation or liability (absolute, accrued,
contingent or otherwise), other than (i) liabilities shown or reflected on the
Balance Sheet, or (ii) liabilities incurred since the date of the Balance Sheet
in the ordinary course of business consistent with past practice, or (iii) in
connection with the performance of this Agreement;
(b) discharged or satisfied any Lien or Other Encumbrance, or paid or
satisfied any obligation or liability (absolute, accrued, contingent or
otherwise) except in the ordinary course of business consistent with past
practice;
(c) mortgaged, pledged or subjected to any Lien or Other Encumbrance
any of the assets, properties or rights of the Seller (including the
Transferred Assets);
(d) sold or transferred any asset, property or business or canceled
any debt or claim or waived any right, except in the ordinary course of
business consistent with past practice;
(e) paid any commission or bonus to any shareholder or Affiliate, or
sold, assigned or transferred by any means any asset of the Seller to an
shareholder;
(f) entered into any material transaction other than in the ordinary
course of its business consistent with past practice except for this Agreement
or the other Transaction Documents; or
(g) made any agreement or understanding, whether in writing or
otherwise, for the Seller to take any of the actions specified in (a) through
(f) above.
SECTION 4.16 TAX MATTERS. (a) It is the intention of the Parent, the
Seller, and the Buyer (collectively known in this section as the Parties), that
Seller shall continue such business as remains after the sale of the Transferred
Assets. Notwithstanding any provision in this Agreement to the contrary, Seller
shall retain such accounting, financial, and other records that are (1) required
by law and (2) will be helpful and relevant in achieving the intention expressed
in the first sentence of this paragraph as well as conforming to income,
franchise, excise, property, sales, net worth and other tax laws and regulations
regarding of jurisdiction.
(b) Buyer shall have the right to copy such records for a period of
seven years.
(c) Tax refunds (including tax carryforwards)/tax obligations of the
Seller that are imposed on income (or measured by income) (including net worth
taxes) that exist on or prior to the date of Closing, shall remain the property
or obligation of the Seller as the case may be.
(d) Neither party shall take any action with any tax authority which
may adversely affect the right of the other party without first notifying the
other party in writing of such proposed action.
(e) Property taxes on the Transferred Assets shall be the obligation
of the Seller for the period up to and including the Closing Date. Otherwise,
they shall be the responsibility of the Buyer.
(f) Seller represents that all of Seller's Tax Returns, that Seller
reasonably believes are required to be filed by or before the date of Closing,
have been filed and that no unpaid obligation is shown on those returns.
(g) Each of the Seller and the Parent has filed all tax returns
required to be filed by or obtained an extension. The Seller and the parent
has paid in a timely manner all Taxes owed by it (whether or not shown on any
Tax Return). The Seller has adequately reserved liabilities on its books for
the payment of all Taxes are not yet due and whether or not disputed. The
Seller will not have any material liability for any Taxes in excess of the
amounts paid or accrued or the reserves established.
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(h) There are no Liens or Other Encumbrances, whether imposed by any
federal, state or local taxing authority or other Governmental Body,
outstanding against any of the assets, properties or business of the Seller,
including the Transferred Assets, that arose in connecting with the failure or
alleged failure to pay any Taxes.
(i) All Taxes and assessments that the Seller is required to withhold
or to collect with respect to amounts owing to employees or contractors or
otherwise have been duly withheld or collected and all withholdings and
collections have been July and timely paid over to the appropriate Governmental
Body.
For purposes of this Section 4.16, the term "the Seller" includes each
other corporation with which the Seller files consolidated or combined income
tax returns or reports.
SECTION 4.17 ABSENCE OF UNDISCLOSED LIABILITIES. The Seller has no
indebtedness, liability or obligation of any character whatsoever, which in the
aggregate exceed $25,000, whether or not accrued and whether or not fixed or
contingent, other than (a) liabilities reflected in the Balance Sheet, (b)
liabilities incurred in the ordinary course of business of the Seller since the
date of the Balance Sheet, none of which has been individually or in the
aggregate material, or is Materially Adverse to the Seller, and (c) liabilities
incurred in connection with the performance of this Agreement and the other
Transaction Documents.
SECTION 4.18 INSURANCE. All policies of insurance, together with the
premiums currently paid thereon, covering the Transferred Assets, or providing
for business interruption, personal, product or public liability coverage with
respect to the business or of which the Seller is the beneficiary (life or
otherwise), are described on Schedule 4.18. Such Schedule sets forth the
insurer, name of policyholder, name of each covered insured, the policy number
and period of coverage and the scope of coverage (including whether the coverage
is on a claims made, occurrence or other basis). Such policies adequately cover
all risks reasonably and prudently foreseeable in the operation and conduct of
the Seller's business. All such policies will be outstanding and in full force
and effect at the Closing Date and all premiums with respect thereto have and
will be paid. Except as set forth on Schedule 4.18, there are no claims,
actions, suits or proceedings arising out of or based upon any of such policies
of insurance, and, so far as is known to the Seller or any of its officers, no
basis for any such claim, action, suit or proceedings arising out of or based
upon any of such policies of insurance, and, so far as is known to the Seller or
any of its officers, no basis for any such claim, action, suite or proceeding
exists. After the Closing Date and giving effect to the assignments set forth
in Section 3.3, each such policy that is an Assigned Contract will continue to
be in full force and effect on identical terms following the transactions
contemplated hereby except that the Buyer will be the named beneficiary. There
are no notices of any pending or threatened, termination's or substantial
premium increases with respect to any of such policies and the Seller is in
compliance with all conditions contained therein.
SECTION 4.19 TRANSACTIONS WITH AFFILIATES. No Affiliate of the Seller
owns any asset, tangible or intangible, which is used in the business of the
Seller. Except as set forth on Schedule 4.19, neither the Seller nor any
Affiliate of the Seller has any direct or indirect interest in any competitor,
supplier or customer of the Seller or in any Person with whom the Seller is
doing business.
SECTION 4.20 NO MATERIAL ADVERSE CHANGE. Except as set forth on
Schedule 4.20 since the date of the Blanca Sheet, the Seller has not experienced
any damage, destruction or loss (whether or not covered by insurance) that
materially and adversely affects the Transferred Assets or its business, or (b)
experienced any Material Adverse Change and neither the Seller nor the Parent
knows of any development or overtly threatened development of a nature that is
or may be Materially Adverse to the Intellectual Property Rights or the other
Transferred Assets.
SECTION 4.21 CHIEF PLACE OF BUSINESS: NAMES. Schedules 4.12 and 4.21
contains a true, correct and complete list of all trade names, fictitious names
and d/b/a's under which the Seller has or is conducting business or which it or
any entity which it has acquired has otherwise used during the last five years.
Schedule 4.21 also lists for the places of business used by the Seller currently
or at any time within the last five years and accurately sets forth the present
location of the Transferred Assets. The Seller has the unconditional right to
use the name "Sytron, Sytos, Sytos Plus" or any similar variations thereon.
Neither the Seller nor the Parent knows, or has reason to know, of any actual or
threatened claim by any third party with respect to the use of such name. The
use of the names "Sytron, Sytos, Sytos Plus" do not infringe upon the rights of
any third party and the Seller has not granted any third party any right to use
such names or any variation thereof.
SECTION 4.22 FINDERS OR BROKERS. Neither the Seller nor the Parent has
utilized the services of any investment banker, broker, finder or intermediary
in connection with the transactions contemplated hereby who might be entitled to
a fee or commission in connection with this Agreement or upon consummation of
the transactions contemplated hereby.
SECTION 4.23 ASSETS. The Transferred Assets constitute substantially
all of the assets necessary or required for the Buyer to conduct the business of
the Seller as it is currently conducted and no Excluded Assets constitute
property or rights material to the Seller's business. No Person other than the
Seller owns any assets or properties situated on any of the Owned Real Property
or the Leased Real Property or necessary to the
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conduct of the Seller's business, except for leased items disclosed in the
Schedules hereto. The Seller has not entered into any agreement to sell,
mortgage, pledge or encumber any of the Transferred Assets except in the
ordinary course and except for this Agreement.
SECTION 4.24 BOOKS AND RECORDS: QUESTIONABLE PAYMENTS. The books,
records and accounts of the Seller maintained with respect to its business
accurately and fairly reflect, in reasonable detail, the assets and liabilities
of the Seller. The Seller has not engaged in any transaction with respect to
its business or used any of the funds of the Seller in the conduct of its
business except for transactions, bank accounts and funds which have been and
are reflected in the normally maintained books and records of the Seller's
business. Such books, records and accounts are maintained in accordance with
GAAP. No officer, director, employee, shareholder or other representative of
the Seller or any Person acting on its behalf has made, directly or indirectly,
any bribes, kickbacks, or political contributions with the Seller's funds,
payments from the Seller's funds not recorded on the Seller's books and records,
payments from the Seller's funds to governmental officials in their individual
capacities or illegal payments to obtain or retain business either within the
united States or abroad.
SECTION 4.25 FULL DISCLOSURE. Neither this Agreement nor any
statement, certificate, writing or document furnished to or on behalf of the
Seller or the Parent in connection with this Agreement or the other Transaction
Documents contain any untrue statement of a material fact or omits to state a
material fact, necessary to make the statements contained herein or therein not
misleading. No fact (other than circumstances or events which are common
knowledge or normal business risks) with respect to the Transferred Assets or
the Seller's Business or Condition is currently known to the Seller or the
Parent which may have a Material Adverse Effect or impair the ability of the
Seller or the Parent to perform its obligations under this Agreement or the
other Transaction Documents to which it is a party which has not been set forth
herein or in the Schedules or Exhibits hereto.
SECTION 4.26 ENVIRONMENTAL MATTERS. (a) Compliance with Environmental
Laws. To Seller's knowledge, Seller has not and no Designated Property (as
defined below) is or has been in violation of any Federal, state or local law,
ordinance or regulation concerning industrial hygiene or Environmental
conditions, including, but not limited to, soil and groundwater conditions
("Environmental laws"). There are no substances or conditions in or on the
Designated Property which may support a claim or cause of action under any
applicable Environmental Law.
(b) Reporting Requirement. The Seller has not reported any, nor
does the Seller have knowledge of any circumstances giving rise to any
reporting requirement under applicable Environmental Laws as to any spills or
releases of any Hazardous Material (as defined below) with respect to said
Designated Properties, nor has the Seller received any notices of spills or
releases of Hazardous Materials with respect thereto.
(c) Proceedings. There is no proceeding or investigation pending
or, to the best knowledge of the Seller or the Parent, threatened by any
Governmental Body or other Person with respect to the presence of Hazardous
Material on the Designated Properties or the migration thereof from or to other
property. The Seller has never been required by any Governmental Body to
treat, cleanup, or otherwise dispose, remove or neutralize any hazardous
Material from or on any Designated Property.
(d) Hazardous Materials. The Seller has not engaged in the
generation, use, manufacture, treatment, transportation, storage in tanks or
otherwise, or disposal of Hazardous Material on or from any Designated
Property. To the best knowledge of the Seller or the Parent after due inquiry,
no Person has engaged in the generation, use, manufacture, treatment,
transportation, storage in tanks or otherwise, or disposal of Hazardous
Material on or from any Designated Property. No (i) presence, release,
threatened release, discharge, spillage or migration of Hazardous Material,
(ii) condition relating to Hazardous Materials that has resulted or would
result in any use, ownership or transfer restriction, or (iii) condition of
actual or potential nuisance or other condition relating to Hazardous Materials
that could give rise to liability has occurred on or from any Designated
Property. No condition exists or has existed that would be reasonably likely
to give rise to any suit, claim, action, proceeding or investigation by any
Person or Governmental Body against the Seller, or any Designated Property as a
result of or in connection with any (1) of the matters referred to in clause
(i), (ii) or (iii) of the immediately preceding sentence, (2) other actives
involving Hazardous Materials, (3) failure to obtain any required Permits or
approvals of any Governmental Body relating to environmental matters, (4)
violation of any terms or conditions of such Permits or approval, or (5) other
violation of applicable Environmental Laws. For purposes hereof, "Hazardous
Material" shall mean any substance, chemical, waste or other material which is
listed, defined or identified as hazardous, toxic or dangerous or otherwise
regulated under any applicable Environmental Law as of the Closing Date as well
as any petroleum, petroleum product or by-product, crude oil, natural gas,
natural gas liquids, liquified natural gas, or synthetic gas usable for fuel,
chemical, waste or other material. For purposes hereof "Designated Property"
shall mean any real property (x) which the Seller now owns or leases or owned
or leased at any time prior to the date of this Agreement, or (y) in which the
Seller now holds or previously held any security interest, mortgage or other
lien or interest.
SECTION 4.29 SOLVENCY. Each of the Seller and the Parent is on the
date hereof, and immediately prior to the Closing Date and after giving effect
to the transactions contemplated hereby will be, "solvent." For purposes
hereof, "solvent" shall (i) mean that the fair value of the Seller's or the
Parent's property is in excess of the total amount of its debts and (ii) the
Seller is able to pay its debt as they mature.
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SECTION 4.28 STATUS OF THE SELLER. The Seller is not a "foreign
person" within the meaning of Section 1445 of the Code. The Seller is not an
"investment company" or a company controlled by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE BUYER
The Buyer represents and warranties to the Seller and the Parent that as of the
date hereof and, except as otherwise specifically noted, as of the Closing
Date:
SECTION 5.1 ORGANIZATION. The Buyer is a corporation organized and
existing in good standing under the laws of the State of Delaware. The Buyer is
a wholly-owned subsidiary of Arcada Holdings, Inc.
SECTION 5.2 AUTHORITY: ENFORCEABILITY. The Buyer has the corporate
power and authority to execute deliver and perform its obligations under this
Agreement, the other Transaction Documents to which it is or is to be a party
and the other documents, agreements and certificates executed and delivered by
the Buyer in connection herewith and therewith. The execution and delivery of
this Agreement, the other Transaction Documents to which it is or is to be a
party do not, and the consummation of the transactions contemplated hereby and
thereby will not, violate any provision of the certificate of incorporation or
by-laws of the Buyer, or any provision of, or result in a breach of any of the
terms or provisions of, or result in the acceleration of any obligation under,
or constitute a default under, any material mortgage, lien, lease, agreement,
instrument. This Agreement is, and the other Transaction Documents
contemplated hereunder to which the Buyer is to be a party when duly executed
and delivered by the Buyer and approved by the Buyer's board of directors will
constitute the valid and legally binding obligation of the Buyer, enforceable
against the Buyer in accordance with its terms. All persons who have executed
this Agreement on behalf of the Buyer, or who will execute on behalf of the
Buyer any other Transaction Document or other documents, agreements and
certificates in connection herewith, have been or will be duly authorized to do
so by all necessary corporate action.
SECTION 5.3 LITIGATION. On the date hereof, the Buyer knows of no
pending or threatened action, suit, proceeding, investigation. Order or
injunction before or by any court or Governmental Body that seeks to restrain
or to prevent the consummation of the transactions contemplated by this
Agreement.
SECTION 5.4 GOVERNMENTAL CONSENTS. Except as otherwise referred to
herein, no consent, action, approval or authorization of, or registration,
declaration or filing with, any Governmental Body having jurisdiction over the
Buyer is required to be obtained by the Buyer in order to authorize the
execution and delivery by the Buyer of this Agreement or the performance by the
Buyer of its terms.
SECTION 5.5 FINDERS OR BROKERS. The Buyer has not utilized the
services of any investment banker, broker, finder or intermediary in connection
with the transactions contemplated hereby who might be entitled to a fee or
commission in connection with this Agreement or upon consummation of the
transactions contemplated hereby.
ARTICLE VI
COVENANTS OF THE SELLER AND THE PARENT PENDING THE CLOSING
The seller and the parent, jointly and severally, hereby covenant and
agree that after the date hereof until the Closing and except as otherwise
agreed to in writing by the Buyer:
SECTION 6.1 APPROVALS: CONSENTS. The seller shall give any notices to
third parties required to be given by it in connection herewith and the seller
shall obtain or cause to be obtained all consents, approvals and authorizations
required by any applicable requirement of law or by any assigned contracts,
contract or agreement to be obtained by the seller in connection with the
consummation of the sale and transfer by the seller of the transferred assets
and the other transactions contemplated hereby. Without limiting the generality
of the foregoing, the Seller shall obtain the written consents and approvals
set forth on Schedule 4.3 in form and substance satisfactory to the Buyer and
will furnish to the Buyer and its counsel executed copies of such consents and
approvals. On or prior to the Closing Date, the Seller shall (obtain all such
waivers and consents under leases, indentures or other agreements to which the
Seller is a party or pursuant to which any of its assets are bound including the
Transferred Assets) as are necessary to prevent a breach or violation of, or
default under, any such lease indenture or other agreement as a result of the
transaction contemplated by this Agreement.
SECTION 6.2 PRESERVATION OF BUSINESS. From the date hereof to and
including the Closing Date, the Seller shall use its best efforts to preserve
its business and properties intact.
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SECTION 6.3 OPERATION OF BUSINESS. From the date hereof to and
including the Closing Date, the Seller shall continue to operate its business in
the ordinary and usual course consistent with past practice, shall maintain the
Transferred Assets in at least as good order and condition as existed on the
date hereof, and, without the prior written consent of the Buyer, shall not:
(a) place any Lien or Other Encumbrance on any Transferred Asset, or
allow any such Lien or Other Encumbrance to be placed or remain on any
Transferred Asset, except in the ordinary course;
(b) enter into any transaction or make any contract, agreement or
commitment relating to the Transferred Assets or its business except in the
ordinary course of business and to the extent not otherwise prohibited by this
Agreement;
(c) enter into any contract (i) which can not be performed within
three months or less; or (ii) which involves the expenditures of over $100,000,
except for sales and purchase contracts entered into in the ordinary course of
business consistent with past practice;
(d) extend credit to customers departing from the normal and customary
trade, discount and credit policies of the Seller consistent with its ordinary
course of business, or make any efforts to collect any Accounts Receivables
other than in the ordinary course of business consistent with its past
practices;
(e) accelerate, terminate, modify or cancel any agreement, contract,
lease or license or pay any amount in respect of any liability that would not
constitute a Retained Liability except in the ordinary course;
(f) increase in any manner the rate of compensation or fringe benefits
of any director, officer or employee or pay any benefit not required by any
plan or agreement as in effect on the date hereof or enter into any employment,
consulting, non- competition, retirement, parachute or indemnification
agreement with any officer, director, employee or agent of the Seller;
(g) enter into any employment contract which is not terminable without
cost or other liability to the Seller upon notice of 30 days of less;
(h) reclassify or change in any manner its outstanding shares of
capital stock or issue, deliver or sell any shares of its capital stock or
other securities, or redeem or otherwise acquire, or enter into any contract or
commitment to redeem or otherwise acquire, any shares of capital stock of the
Seller or any securities convertible into or exercisable for any shares of
capital stock of the Seller;
(i) make any declaration, payment or distribution of a dividend or any
other payment to any shareholder, or in respect of its capital stock;
(j) transfer any assets of the Seller to any shareholder or Affiliate;
(k) amend either its certificate of incorporation or by-laws;
(l) acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a substantial portion of the assets of,
or by any other manner, any business or any corporation, partnership, division
or other entity;
(m) fail to pay its trade accounts payable in the ordinary course or
default in any material respect under any Contract;
(n) take any action of the character described in Section 4.15 and not
listed above which would have been required to be disclosed pursuant thereto
had such action been taken after the date of the Balance Sheet.
SECTION 6.4 MAINTENANCE OF ASSETS. The Seller shall maintain the
Transferred Assets in good operating condition and in the state of maintenance
and repair in which the Seller has historically maintained such assets in its
ordinary course of business.
SECTION 6.5 EXCLUSIVITY. From and after the date hereof and until
the Closing or earlier termination of this Agreement in accordance with the
terms hereof, neither the Seller nor the Parent shall, directly or indirectly
(a) solicit, encourage, initiate or facilitate (nor shall the Seller or the
Parent permit or any of its officers, directors, employees, investment bankers,
financial advisors, accountants or other representatives or agents, directly or
indirectly, to solicit, encourage, initiate or facilitate) any inquiries or
proposals with respect to furnish any information relating to, or participate
in any negotiations or discussions concerning, any acquisition, license or
other disposal of any of the Transferred Assets (other than sales of inventory
made in the ordinary course), or any merger, consolidation, share exchange,
joint venture or other business combination or (b) execute
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any agreement or contract or reach any understanding, whether written or oral,
in an case relating to any of the foregoing. The Seller shall promptly notify
the Buyer immediately if any Person makes any request for information,
proposal, offer, inquiry or contact with respect to any of the foregoing.
SECTION 6.6 PERIODIC INFORMATION. From the date hereof to the Closing
Date, the Seller and the Parent shall, promptly and in a timely manner, notify
the Buyer of any of the following: (i) any material adverse change in the
financial condition or operations of the business from that reflected in the
financial statements delivered pursuant to Section 4.5 or in this Agreement and
the and the Schedules hereto; (ii) any default on the part of the Seller and
any default on the part of any other party (of which the Seller or any officer
or manager of the Seller has knowledge) under any Contract; (iii) any notice of
termination or written threat of termination from any party to a Contract; or
(iv) the termination of the employment with the Seller of any senior officer,
manager or key employee engineer of the Seller.
SECTION 6.7 COOPERATION. Representatives of the Seller will
introduce representatives of the Buyer to such clients and customers of the
Seller as the Buyer requests and will discuss the contemplated acquisition with
such clients and customers. The Seller will use its best efforts to induce
such clients and customers to become clients or customers of the Buyer from and
after the Closing Date.
SECTION 6.8 REPRESENTATIONS AND UPDATES. (a) The Seller and the
Parent (i) shall take all action necessary to render accurate as of the Closing
Date its representations and warranties contained herein, (ii) shall refrain
from taking any action which would render any such representation or warranty
inaccurate in any material respect as of such time, and (iii) shall perform or
cause to be satisfied each covenant or condition to be performed or satisfied
by it under this Agreement.
(b) The Seller and the Parent promptly shall notify the Buyer in
writing (i) if any information set forth in any of the Seller's or Parent's
representation or warranties contained herein is no longer correct, (ii) if the
Seller or the Parent becomes aware that any of its representations or
warranties were incorrect in any material respect when made or (iii) of any
other information of the nature of that set forth in such representations or
warranties which arises after the date hereof and which would have been
required to be included therein or in the Schedules hereto if such information
had been in existence on the date hereof. No such disclosures shall be deemed
to modify, amend or supplement the representations or warranties of the Seller
or the Parent contained herein or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant or for any other purpose whatsoever
(including satisfaction of the conditions set forth in Section 8.1).
SECTION 6.9 UNIFORM COMMERCIAL CODE SEARCHES. The Seller shall, at
the expense of the Seller, conduct, or cause to be conducted, a search for
Uniform Commercial Code financial statements in each state and county in which
the Seller conducts its business or maintains any assets or properties which
name the Seller as debtor. Prior to the Closing Date, the Seller shall deliver
a list of all Uniform Commercial Code financing statements, Form UCC-1 or other
liens recorded in such jurisdictions and a description of the property and
assets encumbered thereby. The Seller shall, prior to the Closing Date (i)
remove or cause to be removed all such material liens and encumbrances, (ii)
file or cause to be filed in such jurisdiction a release or termination of such
lien or encumbrance and (iii) deliver to the Buyer evidence satisfactory in
form and substance to the Buyer of compliance by the Seller of the provisions
of this Section.
SECTION 6.10 BEST EFFORTS. The Seller and the Parent shall use its
best efforts to cause all of the conditions to the obligation of the Buyer to
consummate the transactions contemplated hereby which are within its control to
be met as soon as practicable after the date of this Agreement.
SECTION 6.11 COMPLIANCE WITH LAWS. The Seller shall comply with all
laws, ordinances, rules, regulations and other Requirements of Law applicable to
its business or its operations, assets or properties or the ownership of any of
the Transferred Assets.
SECTION 6.12 BULK SALES COMPLIANCE. The Buyer hereby waives compliance
by the Seller with the provisions of the Bulk Sales Law of the Uniform
Commercial Code of each applicable jurisdiction, in consideration whereof the
Seller agrees to pay and discharge when due all claims of creditors, including
any claims which could be asserted against the Buyer by reason of such non-
compliance. The Seller and the Parent shall indemnify and hold harmless the
Buyer and its Affiliates from and against any and all Damages that could result
from such non-compliance.
SECTION 6.13 ACCESS TO PREMISES AND INFORMATION. From the date hereof
to the Closing Date, the Seller shall give to, or cause to be made available
for, the Buyer and its counsel, accountants, bankers and other representatives
full access and the right to inspect during normal business hours all of the
properties, documents, contracts, employees, books and records of the Seller and
shall permit them to consult with the employees, officers, accountants and
agents of the Seller and the Parent for the purpose of making such investigation
and shall furnish the Buyer with copies of such documents and with such
information with respect to the Transferred Assets and the Seller's business as
the Buyer from time to time reasonably may request.
ARTICLE VII
COVENANTS OF THE BUYER PENDING THE CLOSING
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The Buyer covenants and agrees that after the date hereof and until
the Closing and except as otherwise agreed to in writing by the Seller or the
Parent:
SECTION 7.1 APPROVALS: CONSENTS. The Buyer shall give any notices
to third parties required to be given by it in connection herewith and the
Buyer shall use its best efforts to obtain or cause to be obtained all
consents, approvals and authorizations required by any Requirement of Law or by
any contract or agreement to be obtained by the Buyer in connection with the
purchase by the Buyer of the Transferred Assets and the consummation of the
other transactions contemplated hereby.
SECTION 7.2 REPRESENTATIONS AND UPDATES. (a) The Buyer (i) will
take all action necessary to render accurate as of the Closing Date its
representations and warranties contained herein, (ii) will refrain from taking
any action which would render any such representation or warranty inaccurate in
any material respect as of such time, and (iii) will perform or case to be
satisfied each covenant or condition to be performed or satisfied by it under
this Agreement.
(b) The Buyer promptly shall notify the Seller in writing (i) if any
information set forth in any of the Buyer's representations or warranties
contained herein is no longer correct, or (ii) if the Buyer becomes aware that
any of its representations or warranties were incorrect in any material respect
when made. No such disclosures shall be deemed to modify, amend or supplement
the representations or warranties of the Buyer contained herein or to prevent
or cure any misrepresentation, breach of warranty, or breach of covenant or for
any purpose whatsoever.
SECTION 7.3 BEST EFFORTS. The Buyer shall use its best efforts to
cause all of the conditions to the obligations of the Seller and the Parent to
consummate the transactions contemplated hereby which are within its control to
be met as soon as practicable after the date of this Agreement.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE BUYER'S OBLIGATIONS
All of the obligations of the Buyer under this Agreement are subject
to the satisfaction or fulfillment, at or before the Closing Date, of each of
the following conditions precedent (any of which may be waived, in whole or in
part, by the Buyer in its sole discretion):
SECTION 8.1 REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Seller and the Parent contained in this
Agreement (including the Schedules and Exhibits hereto), or in any certificate
or document delivered to the Buyer in connection herewith, shall have been true
and correct in all material respects on the date hereof and shall be true and
correct in all material respect at the Closing date as if made again on and as
of the Closing Date without regard to or giving effect to any schedule updates
or supplement disclosure.
SECTION 8.2 COMPLIANCE WITH THIS AGREEMENT. The Seller and the
Parent shall have duly performed and complied with all agreements and
conditions required by this Agreement to be performed or complied with by them
at or before the Closing Date.
SECTION 8.3 CLOSING CERTIFICATE: The Seller and the Parent shall
have delivered to the Buyer a certificate executed on its behalf by an
authorized office and attested by its Secretary, dated the Closing Date,
representing and certifying, in such detail as the Buyer may reasonably
request, that the conditions set forth in this Article VIII have been fulfilled
(including receipt of all necessary consents and approvals) at or prior to the
Closing Date, and that the Seller and the Parent are not in default under any
provision of this Agreement.
SECTION 8.4 CLOSING DOCUMENTS: The Seller and the Parent shall have
furnished the Buyer with the following documents:
(a) a certificate as to the good standing of the Seller and the
Parent, executed by the appropriate official of the state of its incorporation
and each jurisdiction in which the Seller is licensed or qualified to do
business as a foreign corporation, as specified on Schedule 4.1;
(b) the by-laws of the Seller and the Parent, duly certified by its
Secretary as being in force at all times since at least July 1, 1995; together
with an incumbency certificate for the Seller and the Parent dated as of the
Closing Date, including specimen signatures;
(c) the resolution or resolutions or the consent, duly adopted by the
requisite number of holders of capital stock of the Seller entitled to vote
thereon, authorizing the sale and transfer of the Transferred Assets, as
provided for herein and the change of name of the Seller as provided for herein
and the other transactions contemplated hereby, certified by the Secretary of
the Seller as true, correct and complete;
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(d) the resolution or resolutions duly adopted by the Board of
Directors of the Seller and the Parent (or an appropriately authorized
committee thereof) with respect to the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby certified by the
Secretaries of the Seller and the Parent as true, correct and complete;
(e) a satisfactory consent of each landlord under each Lease to the
assignment thereof to the Buyer; and
(f) all such other documents, uniform commercial code search reports,
tax lien searches, certified resolutions, certificates or instruments as the
Buyer reasonably may have requested.
SECTION 8.5 OPINION OF THE SELLER'S COUNSEL. Graven Perry Block
Brody & Qualls, counsel to the Seller and the Parent, shall have delivered to
the Buyer a favorable written opinion, dated the Closing Date and addressed to
the Buyer, substantially in the form of Exhibit J attached hereto and covering
such other matter as the Buyer may reasonable request.
SECTION 8.6 LEGAL MATTERS SATISFACTORY. All legal matters, and the
form and substance of all documents, certificates, opinions and instruments to
be delivered by the Seller and the Parent to the Buyer at the Closing, shall
have been approved by, and shall be satisfactory in all reasonable respect to,
the Buyer and its counsel.
SECTION 8.7 NO MATERIAL ADVERSE CHANGES; NO MATERIAL DESTRUCTION.
(a) There shall not have been any Material Adverse Change in the financial
condition or prospects of the Seller at the Closing Date from that disclosed on
the Balance Sheet and in the financial information provided by the Seller and
referred to in Section 4.4, or in the condition or value of any of the
Transferred Assets and the Buyer shall have been furnished with a certificate
of the President or the Chief Financial Officer of the Seller, dated the
Closing Date, to such effect.
(b) The Transferred Assets or any material portion thereof shall not
have been adversely affected in any was as a result of any fire, accident,
earthquake, flood, shortage, embargo, riot, civil disturbance, uprising,
activity or armed forces or act of God or public enemy, nor shall any thereof
have been stolen, taken by eminent domain or subject to condemnation and no
condemnation proceedings shall have been commenced and the Seller shall not
have received notice of the proposed commencement of any such proceedings. If
the Closing occurs hereunder despite such casualty, whether as a result of the
waiver of this condition by the Buyer or otherwise, the Seller shall assign or
pay over to the Buyer the proceeds of any insurance or any condemnation
proceeding with respect to any casualty involving the Transferred Assets which
occurs after the date hereof.
SECTION 8.8 CONSENTS; PERMITS. (a) The Seller shall have delivered
to the Buyer all of the consents, approvals, authorizations, qualifications,
and filings as are required for the sale and assignment of the Transferred
Assets and the assignment to or assumption by the Buyer of the Assigned
Contracts, Assumed Liabilities and other agreements, leases, contracts or other
documents or instruments included among the Transferred Assets which require
such consent. Without limiting the generality of the foregoing, the Seller
shall deliver to the Buyer all consents, approvals, authorizations,
qualifications and filings set forth on Schedule 4.3.
(b) The Seller shall have received all written consents,
authorizations and approvals required by any applicable law, rule, regulation
or other Requirement of Law of any Governmental Body required in connection
with the sale of the Transferred Assets and the assumption of the Assumed
Liabilities pursuant to this Agreement and the consummation of the transactions
contemplated hereby and by the other Transaction Documents.
(c) The Buyer shall have obtained such Permits, if any, as are
reasonably necessary for the Buyer to own and operate the Transferred Assets on
the Closing Date in the same manner as heretofore conducted and operated by the
Seller.
SECTION 8.9 NO THREATENED OR PENDING LITIGATION; NO PROHIBITIONS. On
the Closing Date, no suit, action, arbitration or other proceeding, or
injunction or final judgment relating thereto, shall be overtly threatened or
be pending before any court or government or regulatory official, or any
Governmental Body which (a) seeks to restrain, prohibit, or invalidate the
consummation of the transactions contemplated hereby or by the other
Transaction Documents seeks material damages from Buyer with respect thereto
(b) seeks to frustrate the Buyer's ability to own or operate the Transferred
Assets subsequent to the Closing in a manner consistent with the Seller's
operation thereof in the ordinary course of business, or (c) may, if it is
adversely decided against the Buyer, the Seller or the Parent, Materially
Adverse Affect the value of any of the Transferred Assets to the Buyer. No
governmental investigation that might result in any such suit, action,
arbitration or other proceeding shall be pending or overtly threatened and no
Person shall have obtained any Order enjoining, restraining or prohibiting the
transactions contemplated hereby or by the other Transaction Documents.
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SECTION 8.10 OTHER TRANSACTION DOCUMENTS. The Seller shall have duly
executed and delivered to the Buyer the instruments of conveyance and transfer
specified in Section 3.3 and the Seller and the Parent, as applicable, shall
have duly executed and delivered to the Buyer the other Transaction Documents to
which it is a party, each substantially in the forms attached as exhibits
hereto.
SECTION 8.11 LIEN SEARCHES; RELEASE OF LIENS, ETC. The Buyer shall
have received from the Seller true and complete copies of the results of
searches of all uniform commercial code filings, tax liens, fixture filings in
each appropriate jurisdiction showing that there is on file in such records no
effective financing statement or Tax Lien or other Lien or Other Encumbrance
except those relating to the indebtedness to Sanwa Business Credit Corporation
and other non-material Liens or Other Encumbrances. The Buyer shall have
received satisfactory evidence that the security interest granted to Sanwa
Business Credit and all other Liens or Other Encumbrances covering any of the
Transferred Assets have been released and terminated.
SECTION 8.12 INTELLECTUAL PROPERTY. The Buyer shall have received
evidence satisfactory to it that no employee, former employee or consultant of
the Seller has any ownership interest or other claim with respect to any
Intellectual Property Rights that it developed, invented, worked on or assisted
in the development of. No claims or objections shall have been asserted by any
Person with respect to the ownership, validity of enforceability of any of the
Intellectual Property Rights and no proceedings shall have been instituted or
threatened against the Seller alleging any such infringement or violation.
SECTION 8.13 SELLER FINANCIALS. The Seller and the Parent shall have
furnished to the Buyer such financial statements relating to the Seller as may
be reasonably requested by Buyer.
ARTICLE IX
CONDITIONS PRECEDENT TO THE SELLER'S AND PARENT'S OBLIGATIONS
The obligations of the Seller under this Agreement to sell the
Transferred Assets and the obligations of the Seller and the Parent to
consummate the other transactions contemplated hereby are subject to the
satisfaction or fulfillment, at or before the Closing Date, of each of the
following conditions precedent (any of which may be waived, in whole or in
part, by the Seller and the Parent in its sole discretion):
SECTION 9.1 REPRESENTATIVE AND WARRANTIES. All of the
representations and warranties of the Buyer contained in this Agreement, or in
any certificate or document delivered to the Seller and the Parent in
connection herewith, shall be true and correct in all material respects at the
Closing Date as if made again on and as of the Closing Date without regard to
or giving effect to any schedule updates or supplemental disclosure.
SECTION 9.2 COMPLIANCE WITH THIS AGREEMENT. The Buyer shall have
duly performed and complied with all agreements and conditions required by this
Agreement to be performed or complied with by the Buyer at or before the
Closing Date.
SECTION 9.3. CLOSING CERTIFICATE. The Seller and the Parent shall
have furnished with a certificate of an appropriate officer of the Buyer, dated
the Closing Date, certifying in such detail as the Seller and the Parent may
reasonably request to the fulfillment of the foregoing conditions set forth in
Sections 9.1 and 9.2.
SECTION 9.4 PAYMENT. The Buyer shall have paid to the Seller the
amounts required to be paid to the Seller pursuant to, and in accordance with,
Section 3.2.
SECTION 9.5 OTHER TRANSACTION DOCUMENTS. The Buyer shall have duly
executed and delivered to the Seller the Assumption Agreement and the other
Transaction Documents to which it is a party, each substantially in the forms
attached as exhibits hereto.
SECTION 9.6 CLOSING DOCUMENTS. The Buyer shall have furnished the
Seller and the Parent with the following documents:
(a) the certificate of incorporation and all amendments thereto of the
Buyer, duly certified as of a recent date by the Secretary of State of the
jurisdiction of the Buyer's incorporation;
(b) a certificate as to the good standing of the Buyer, executed by
the appropriate official of the jurisdiction of the Buyer's incorporation;
(c) the by-laws of the Buyer, duly certified by its Secretary or an
Assistant Secretary as being in force at all times since at least July 10,
1995, or, if later, its date of incorporation, together with an incumbency
certificate for the Buyer, dated as of the Closing Date, including specimen
signatures;
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(d) the resolution or resolutions duly adopted by the Board of
Directors of the Buyer (or an appropriately authorized committee thereof) with
respect to the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, certified by the Secretary or an
Assistant Secretary of the Buyer as true, correct and complete;
(e) such other documents, certified resolutions, certificates or
instruments as the Seller and the Parent reasonably may have requested in
respect of the transactions contemplated by this Agreement.
SECTION 9.7 OPINION OF THE BUYER'S COUNSEL. Thomas F. Mulvaney,
special counsel to the Buyer, shall have delivered to the Seller a written
opinion, dated the Closing Date and addressed to the Seller, substantially in
the forms of Exhibit K attached hereto.
SECTION 9.8 NO THREATENED OR PENDING LITIGATION; NO PROHIBITIONS. On
the Closing Date, no suit, action, arbitration or other proceeding, or
injunction or final judgment relating thereto, shall be overtly threatened or
be pending before any court or government or regulatory official, or any
Governmental Body which (a) seeks to restrain, prohibit, or invalidate the
consummation of the transactions contemplated hereby or by the other
Transaction Documents seeks material damages from Buyer with respect thereto
(b) seeks to frustrate the Buyer's ability to own or operate the Transferred
Assets subsequent to the Closing in a manner consistent with the Seller's
operation thereof in the ordinary course of business, or (c) may, if adversely
decided against the Buyer, the Seller or the Parent, Materially Adversely
Affect the value of any of the Transferred Assets to the Buyer. No governmental
investigation that might result in any such suit, action, arbitration or other
proceeding shall be pending or overtly threatened and no Person shall have
obtained any Order enjoining, restraining or prohibiting the transactions
contemplated hereby or by the other Transaction Documents.
SECTION 9.9 SANWA CONSENT. The Seller and Parent shall have received
the written consent of Sanwa Business Credit Corporation to enter into this
Agreement, to sell the Transferred Assets and to consummate the transactions
contemplated under the Agreement.
SECTION 9.10 BOARDS OF DIRECTORS APPROVAL. Each of Seller and Parent
shall have received the approval of their respective Boards of Directors to
enter into this Agreement, to sell the Transferred Assets and to consummate the
transactions contemplated under this Agreement.
ARTICLE X
ADDITIONAL COVENANTS OF THE PARTIES
SECTION 10.1 NAME CHANGE ETC. (a) On the Closing Date (or within ten
business days thereafter), the Seller will deliver to the Buyer a copy of the
duly executed amendment to the Seller's certificate of incorporation changing
the Seller's name to a name acceptable to the Buyer and not confusingly similar
to the Seller's current name. The Seller shall have filed such amendment with
the appropriate officials of the state of the Seller's incorporation and all
such other offices and jurisdictions necessary or appropriate to effect such
changes.
(b) From and after the Closing Date the Seller and its affiliates
shall cease to use the names Sytron, Sytos, Sytos Plus and other tradenames of
the Seller or any Trademarks or any variations thereof.
SECTION 10.2 POWER OF ATTORNEY: TURN-OVER. (a) Effective on the
Closing Date, the Seller constitutes and appoints the Buyer and its successors
and assigns, as the true and lawful attorneys for the Seller, with full power of
substitution, in the name of the Seller, but on behalf of and for the benefit
of, the Buyer, to institute and prosecute, in the name of the Seller or
otherwise, all proceedings which the Buyer may deem necessary or desirable in
order to collect, assert or enforce any claim, right or title of any kind in or
to the Transferred Assets, to defend and compromise any and all actions, suits
or proceedings in respect of any such Transferred Assets, and to do all such
acts and things in relation thereto as the Buyer shall deem advisable. The
foregoing powers are and shall be coupled with an interest and shall be
irrevocable by the Seller or by the Seller's dissolution or in any manner or for
any reason. The Buyer shall retain for its own account any amounts collected
pursuant to the foregoing powers, including any sums payable in respect thereof,
and the Seller shall promptly pay the Buyer, when received, any amounts which
shall be received by the Seller in respect of the Transferred Assets as provided
herein. Seller shall execute and deliver to the Buyer at Closing a separate
power of attorney in form and substance substantially similar to the foregoing.
(b) After the Closing Date, the Buyer shall have the right to receive
and open all mail, packages and other communications addressed to the Seller
and relating to the Transferred Assets. The Seller agrees promptly to deliver
to Buyer such mail, packages or communications. The Buyer shall have the right
and authority to collect for its own account all Account Receivables (whether
or not scheduled) as of the close of business on the Closing Date and the
Seller shall promptly transfer or deliver to the Buyer any cash or other
property received directly or indirectly by Seller in respect of such Accounts
Receivable, and such funds will be held in trust for the benefit of the Buyer
until so delivered by the Seller. The Buyer shall
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promptly deliver to the Seller all mail, packages and other communications
received by it which relate to the Seller but do not relate to the Transferred
Assets.
SECTION 10.3 PUBLICITY. No party shall issue any press release or
announcement or make any reference to the transactions contemplated hereby to
any third party (except in connection with obtaining requisite consents) without
the prior written consent of the other party, which consent shall not be
unreasonably withheld, provided however, that the parties may make such
disclosure as may be required by law, rule or regulation (including relevant
securities laws or any listing or trading agreement covering publicly traded
securities), in which case the party making the release or announcement shall,
before making such release or announcement, afford the other party a reasonable
opportunity to review and comment upon such release or announcement.
SECTION 10.4 COOPERATION. The parties hereto shall cooperate with each
other and will use their reasonable best efforts to promptly prepare, execute
and file all necessary documentation, to effect all applications, notices,
petitions, and filings, and to obtain as promptly as practicable all permits,
consents and approvals and authorizations of all third Persons and Governmental
Bodies which are necessary or advisable to consummate the transactions
contemplated by this Agreement. The parties hereto agree that they will consult
with each other with respect to the obtaining of all permits, consents,
approvals and authorizations of all third parties and Governmental Bodies
necessary or advisable to consummate the transactions contemplated by this
Agreement, and each party will keep the other apprised of the status of matters
relating to completion of the transactions contemplated herein.
SECTION 10.5 DELIVERY OF SELLER FINANCIALS. If, notwithstanding
Section 8.13, Seller's financials are not provided to the Buyer and the Buyer
nonetheless closes and Buyer further requests the delivery of such financial
statements, then the Seller and the Parent, at their expense, shall provide the
Buyer, within 60 days after the Closing, with such financial statements
requested by Buyer.
SECTION 10.6 RETURN OF INFORMATION. If the Closing is not consummated
and this Agreement is terminated, then the Buyer within a reasonable time period
shall return all documents, contracts and records of the Seller furnished by the
Seller to the Buyer.
SECTION 10.7 SALES AND USE TAX CLEARANCE. The Seller shall pay on a
timely basis all tax on sales consummated prior to the Closing Date. The Seller
and the Parent shall hold the Buyer harmless from any and all claims or liens on
the Transferred Assets or otherwise relating to such applicable Tax laws. The
Seller agrees to furnish to the Buyer a clearance certificate from the
appropriate governmental agency and any related certificates that the Buyer may
reasonably request as evidence that all sales and use and other Tax liabilities
of the Seller accruing a reasonable period before the Closing Date have been
fully satisfied or provided for.
SECTION 10.8 EMPLOYEE AND LABOR MATTERS. (a) The Buyer shall not
assume or succeed to any labor agreements applicable to the Seller. Except for
the Assumed Liabilities set forth on Schedule 2.3 concerning the accrued
vacation and Section 2.3 (c) concerning Buyer's assumption of $100,000 of
liabilities, the Seller shall be and remain liable for any and all claims,
liabilities, damages, losses, costs or expenses incurred by the Seller or
resulting from occurrences that transpire on or prior to the Closing Date to
both hourly and salaried employees of the Seller, including but not limited to
claims before any court or Governmental Body such as the National Labor
Relations Board, Department of Labor and any agency or instrumentality having
jurisdiction over claims under state fair employment rights acts, workers'
compensation and/or unemployment compensation laws, or similar Requirements of
Laws.
(b) All expenses covered under medical, dental, vision, travel,
accident, accidental death and dismemberment and life insurance plans (if any)
of the Seller and which are incurred by Employees and their dependents on or
before the Closing Date, irrespective of the time at which claims are
presented, are the obligation and responsibility of the Seller and shall be
paid directly by the Seller or its Affiliates or its insurance carrier to such
Employees and their dependents.
(c) All short-term, long-term and extended disability benefits (if
any) payable to Employees and their dependents who became disabled on or before
the Closing Date are the responsibility of the Seller and shall be paid
directly by Seller or its insurance carrier to such Employees and their
dependents.
(d) The Seller covenants and agrees to assume all obligations under
continuation coverage rules of COBRA with respect to a "qualifying event"
within the meaning of Section 4980B of the Code or Section 603 of ERISA.
(e) If any Employees are terminated from employment by the Seller as a
result of the transactions contemplated by this Agreement, any obligations
arising out of such termination of employment, including but not limited to
severance, accrued vacation pay, COBRA, obligations, holiday pay, sick pay, pay
for personal days and wrongful termination, shall be the responsibility solely
of the Seller provided that the Buyer agrees to assume up to $100,000 of any
such obligation.
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(f) The Seller shall promptly terminate all current Employees
following the Closing Date. In addition, at the Buyer's request, the Seller
shall cooperate in the preparation of a letter to be distributed to, and signed
by, immediately prior to the Closing, each Employee of the Seller who the Buyer
intends to rehire advising such Employees of the terms of their employment with
the Buyer relating to benefits.
(g) The Buyer shall make offers of employment to the Employees
terminated by Seller on terms substantially comparable to their terms of
employment prior to termination and shall grandfather their length of service
to the Seller to their employment status for purposes of receipt of employee
benefits in accordance with Buyer's employee policies.
10.9 ACCESS. From and after the Closing and for a period of seven
years thereafter, the Buyer shall allow the Seller and its representatives
reasonable access to tax records and related records which after the Closing
are in the custody or control of the Buyer. The Seller shall provide the Buyer
with reasonable notice and shall coordinate the copying and delivery of such
documents. Notwithstanding the above, the Seller shall allow Buyer comparable
access to such records which Seller may have in its possession for a period of
seven years after the Closing Date.
10.10 SYTRON U.K. INC. ASSET. The Seller agrees that, at the request
of the Buyer, for no additional consideration it shall cause Sytron, U.K., Inc.
to transfer any asset owned by it at the time of the Closing to the Buyer.
10.11 NON-SOLICITATIONS: NO HIRING. Neither the Seller nor the Parent
or any of their Affiliates shall, prior to the first anniversary of the
Closing, solicit any of the Employees listed on Schedule 4.8 leave the
employment of the Buyer or its Affiliates.
10.12 SPACE. The Buyer will continue to allow the Seller to utilize a
portion of the third floor of the premises located at 134 Flanders Road,
Westboro, Massachusetts in connection with its "Atlas Project" and will provide
reasonable access for the Seller's employees in said project, all without any
charge or rent. The Seller and Parent agree to vacate such premises within
forty-five (45) days after Closing.
10.13 PAYROLL AND RELATED EXPENSES. To the extent Seller pays any
payroll, payroll expenses and related payroll withholding to or on behalf of
its former employees for any period of time after their termination of
employment with Seller and while employed by Buyer, Buyer shall promptly
reimburse Seller for all such expenses upon receipt of supporting documentation
and records concerning such requested reimbursement. In addition, Seller shall
be responsible for all business-related expenses (e.g. travel, auto, meal,
lodging and relocation expenses) incurred by employees of Seller on or prior to
July 2, 1995 that are not reflected in the Balance Sheet and Buyer shall be
responsible for all such business-related expenses incurred by employees of
Buyer after July 2, 1995.
ARTICLE XI
INDEMNIFICATION
SECTION 11.1 INDEMNIFICATION BY THE SELLER AND THE PARENT. (a) The
Seller and the Parent shall, jointly and severally, be liable for, shall
indemnify the Buyer, its officers, directors, Affiliates and employees for,
shall hold harmless, protect and defend the Buyer, its officers, directors,
Affiliates or employees from and against, and shall reimburse the Buyer, its
officers, directors, Affiliates and employees for, any and all Buyer's Damages
(as defined in Section 11.1(b)).
(b) The term "Buyer's Damages" means all Damages in excess of $350,000
sustained, incurred or suffered by the Buyer, its officers, directors,
Affiliates or employees resulting from or arising in connection with:
(i) any misrepresentation by the Seller or the Parent contained in or
made pursuant to this Agreement or in any certificate, instrument or agreement
delivered to the Buyer pursuant to or in connection with this Agreement or any
Schedule or Exhibit hereto;
(ii) any breach of warranty or any default in the performance of any
covenant or obligation of the Seller or the Parent under or in connection with
this Agreement or the other Transaction Documents;
(iii) any claim asserted by a third person, which arises from or
relates to any liabilities or obligations (other than Assumed Liabilities)
incurred by the Seller or otherwise arising in connection with the Seller's
ownership of the Transferred Assets or the conduct of the Seller's business
prior to the Closing whether asserted before or after the Closing, including,
without limitation, trade obligations or trade debts other than Assumed
Liability;
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(iv) any Retained Liability;
(v) any liability for Taxes incurred by the Seller arising for any
reason whatsoever, including, without limitation, arising out of or relating to
the operation of its business, the execution and delivery of this Agreement or
the other Transaction Documents;
(vi) any liabilities and claims under any contract or agreement which
is not an Assigned Contract,
(vii) any claim made by a third party alleging facts, which, if true,
would entitle the Buyer to indemnification pursuant to this Section;
(viii) any claim made by a creditor of the Seller under or as a result
of the Seller's non-compliance with the provisions of the any applicable
transfer law, or any similar law; and
(ix) without limiting the generality of the foregoing, any pension,
severance, health and others employee benefit, including severance or vacation
pay, supplemental unemployment benefits or any similar benefit, which are the
liability of the Seller as set forth in Section 10.9 (subject to Section
10.9(e)).
SECTION 11.2 INDEMNIFICATION BY THE BUYER, (a) The Buyer shall be
liable for, shall indemnity the Seller, its officers, directors, Affiliates and
employees for, shall hold harmless, protect and defend the Seller, its officers,
directors, Affiliates and employees, from and against, and shall reimburse, the
Seller for, any and all Seller's Damages (as defined in Section 11.2(b)).
(b) The term "Seller's Damages" means all damages sustained,
incurred or suffered by the Seller, its officers, directors, Affiliates and
employees, resulting from or arising in connection with:
(i) any misrepresentations by the Buyer contained in or made
pursuant to this Agreement or in any certificate instrument or agreement
delivered to the Seller pursuant to or in connection with this Agreement;
(ii) any breach of warranty or any default in the performance
of any covenant or obligation of the Buyer under or in connection with this
Agreement; or
(iii) any Assumed Liability.
SECTION 11.3 MATTERS INVOLVING THIRD PARTIES, ETC. (a) If any legal
proceeding shall be instituted or any claim or demand made against an
indemnified party or a party which proposes to assert that the provisions of
this Article XI apply ( the "Indemnified Party") such Indemnified Party shall
give prompt notice to the claim to the party obliged or alleged to be so obliged
so to indemnify such Indemnified Party (the "Indemnitor"). The omission so to
notify such Indemnitor, however, shall not relieve such Indemnitor from any duty
to indemnify which otherwise might exist with regard to such claim unless (and
only to the extent that)the omission to notify materially prejudices the ability
of the Indemnitor to assume the defense of such claim.
After any Indemnitor has received notice from an indemnified Party that a claim
has been asserted against such Indemnified Party, the Indemnitor shall promptly
pay to the Indemnified Party the amount of such Damages in accordance with and
subject to the provisions of this Section provided however, that no such
payment shall be due during any period in which the Indemnifying Party is
contesting in good faith either its obligations to make such indemnification or
the amount of Damages payable or both. After any Indemnitor has received
notice from an Indemnified Party that a claim has been asserted against it by a
third party, the Indemnitor shall have the right, upon giving written notice to
the Indemnified Party to participate in the fense of such claim and to elect to
assume the defense against the claim at its own expense, through the
Indemnified Party's attorney or an attorney selected by the Indemnitor and
approved by the Indemnified Party, which approval shall not be unreasonably
withheld; provided however, that it shall be condition to such election to
assume such defense that (i) the Indemnitor shall provide the Indemnified Party
with evidence acceptable to the Indemnified Party that the Indemnitor will have
the financial resources to defend against the claim and to fulfill its
indemnification obligations hereunder (ii) the claim involves only money
damages and does not seek an injunction or other equitable relief (iii) the
settlement of, or an adverse judgment with respect, to the claim, is not in the
good faith judgment of the Indemnified Party, likely to establish a precedent
or practice adverse to the continuing business of the Buyer or the Indemnified
party, and (iv) the Indemnitor conducts the defense of the claim actively and
diligently. If the Indemnitor fails to give prompt notice of such election,
then the Indemnitor shall be deemed to have elected not to assume the defense
of such claim and the indemnified Party may defend against the claim with its
own attorney.
(b) If the Indemnitor so elects to participate in the defense of such
claim or to assume the defense against claim and the conditions of the
provision of Section 11.3 (a) are satisfied, then the Indemnified Party will
cooperate and make available to the Indemnitor (and its representatives) all
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employees, information, books and records in its possession or under its
control which are reasonably necessary or useful in connection with such
defense; and if the Indemnitor shall have elected to assume the defense of a
claim, then the Indemnitor shall have the sole right to compromise and settle
in good faith any such claim provided that the conditions of Section 11.3 (a)
are satisfied. If the Indemnitor shall elect to defend or to agree in writing
to compromise or to settle any such claim, then it shall be bound by any
ultimate judgment or settlement as to the existence and amount of the claim,
and the amount of said judgment or settlement shall be conclusively deemed for
all purposes of this Agreement to be a liability on account of which the
Indemnified Party is entitled to be indemnified hereunder. If the Indemnitor
is conducting the defense of a claim, the Indemnified Party may retain separate
co-counsel at its cost and expense and participates in such defense;
(c) If the Indemnitor does not elect to assume or is deemed to have
elected not to assume the defense of a claim or in the event any of the
conditions in the proviso to Section 11.3 (a) above becomes unsatisfied then:
(i) the indemnified Party alone shall have the right to conduct such
defense:
(ii) the Indemnified Party shall have the right to compromise and to
settle, in good faith, the claim without the prior consent of the Indemnitor;
(iii) the Indemnitor will periodically reimburse the Indemnified Party
for costs (including legal fees); and
(iv) if it is ultimately determined that the claim of loss which shall
form the basis of such judgment or settlement is one that is validly an
obligation of the Indemnitor that elected not to assume the defense, then such
Indemnitor shall be bound by an ultimate judgment or settlement as to the
existence and the amount of the claim and the among of said judgment or
settlement (including the costs and expenses of defending such claims) shall be
conclusively deemed for all purposes of this Agreement to be a liability on
account of which the Indemnified Party is entitled to be indemnified hereunder.
SECTION 11.4 SET-OFF: CUMULATIVE RIGHTS. (a) The Buyer is hereby
authorized by the Seller, at any time and/or from time to time, to set off
against and deduct from any amounts owed to the Seller under Section 3.1
(without first having to resort to any procedures provided for in Section 11.3)
the amount of any Buyer's Damages or any other loss, expense, cost or liability
paid or suffered or incurred by the Buyer as a result of any breach of any
representation, warranty, covenant or obligation of the Seller set forth in or
made or undertaken pursuant to this Agreement. to excise such right of set-off,
the Buyer shall notify the Seller in writing of the amount of the set-off,
together with an explanation of the reason therefore and to which obligation
such amount is to be applied.
(b) The rights of indemnification and set-off provided for hereunder
are in addition to, and not in derogation of, any statutory, equitable or
common law remedy available to a party for breach of representation, warranty,
or covenant and shall be cumulative with any other right an Indemnified Party
may have or may hereafter acquire under any law, any provision of this
Agreement, any other Transaction Document or otherwise, and any rights any such
Person shall have may be asserted completely and against the Indemnitor, with
out regard to the rights such Person may have against any other Person. At no
time may an Indemnitor assert a defense to its obligation to provide
indemnification as set forth in this Article XI that the Indemnified Party or
any of its employees or agents, had any knowledge of the matter to which the
claim for indemnification relates or conducted any investigation relating
thereto prior to the Closing, and each party hereby irrevocably waives all such
defenses.
ARTICLE XII
TERMINATION OF AGREEMENT
SECTION 12.1 TERMINATION. This Agreement and the transactions
contemplated hereby may be terminated or abandoned at any
time before the Closing Date.
(a) by the mutual written consent of the Seller, the Parent and the
Buyer,
(b) by the Buyer, by giving written notice to the Seller (i) if there
has been a material misrepresentation in this Agreement by the Seller or the
Parent, or a material breach by the Seller or the Parent of any of its
warranties or covenants set forth herein, which breach is not cured within five
(5) business days following written notice to the party committing such breach,
or with which breach, by its nature cannot be cured prior to the Closing, or
(ii) if the Closing shall not have occurred on or before August 10, 1995, by
reason of the failure of any condition precedent under Article VIII hereof
(unless the failure results primarily from the Buyer itself breaching any
representation, warranty or agreement contained in this Agreement):
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(c) by the Seller and the Parent, by giving written notice to the
Buyer (i) if there has been a material misrepresentation in this Agreement by
the Buyer, or a material breach by the Buyer of any of the warranties or
covenants of the Buyer set forth herein, which breach is not cured within five
(5) business days following written notice to the party committing such breach,
or with which breach, by its nature, cannot be cured prior to the Closing (ii)
if the Closing shall not have occurred on or before August 10, 1995, by reason
of the failure of any condition precedent under Article IX hereof (unless the
failure results primarily from the Seller or the Parent breaching any
representation, warranty or agreement contained in this Agreement);
(d) by the Buyer, at any time prior to thirty (30) days after the date
hereof if in its sole and absolute discretion the Buyer is not satisfied with
the results of its continuing business, legal and accounting due diligence
regarding the Seller and Transferred Assets; and
(e) by either the Seller or the Buyer if the Closing Date shall not
have occurred before August 15, 1995, for any reason other than the failure of
the party seeking to terminate this Agreement to perform its obligations
hereunder or misrepresentation or breach of warranty by such party herein.
SECTION 12.2 OBLIGATIONS UPON TERMINATION; CURE. (a) If this Agreement
shall be terminated pursuant to Section 12.1(a), 12.1(d), or 12.1(c), then
neither party shall have any further obligation to the other; provided, however,
that if the Seller and the Parent of the Buyer shall have the right to terminate
this Agreement pursuant to Section 12.1(b) or 12.1(c), then it is expressly
understood and agreed that the terminating party's right to pursue all legal
remedies for breach of contract and Damages (including the payment of all fees
and expenses incurred in connection with the preparation and negotiation of this
Agreement) also shall survive such termination unimpaired.
(b) If the Seller and the Parent or the Buyer shall have the right to
terminate this Agreement pursuant to Section 12.1(b) or 12.1(c), then the party
which does not have the right so to terminate this Agreement will use its best
efforts to care or to correct the condition giving the rise to such right. If
such party is unable to care or to correct the condition giving rise to such
right, then the other party may exercise its right under Section 12.1(b) or
(c), as the case may be, to terminate this Agreement or may waive such right
and proceed to consummate the transactions contemplated hereby, provided
however that this sentence shall not be deemed to limit or define in any
respect the Damages which a party may suffer or incur as a result of the breach
of any provision of this Agreement by the other.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
SECTION 13.1 COSTS AND EXPENSES. Except as otherwise provided herein,
each party shall pay its own expenses in connection with the preparation and
performance of the terms of this Agreement and the transactions contemplated
hereby, including all fees and expenses of its investment bankers, counsel,
accountants and other representatives. The provisions of this Section shall
survive the termination of this Agreement.
SECTION 13.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. (a) All of
the representations and warranties contained herein or in any certificate,
statement, document or instrument furnished hereunder or under the other
Transaction Documents shall survive the Closing for a period of four months,
except with regard to the representations and warranties contained in Sections
4.7, 4.12, 4.13, 4.16, 4.17, 4.23, and 4.26 such representations and warranties
shall survive the Closing for a period of twelve months (even if the party to
whom any such representation or warranty was made, knew or had reason to know of
any misrepresentation or breach of warranty at the time of Closing). The
covenants of the Buyer, the Seller and the Parent shall continue in full force
and effect in accordance with their respective terms.
(b) The representations and warranties shall survive the Closing as
set forth in clause (a) above and any and all investigations and inquiries made
by a party or its representatives prior to the Closing. All such
representations and warranties shall be deemed to be material and to have been
relied upon, notwithstanding any such investigation or the decision by any
party to nonetheless complete the Closing.
(c) The parties intend that each representation, warranty or covenant
contained herein shall have independent significance. If any party has
breached any representation, warranty or covenant contained herein in any
respect, the fact that there exists another representation, warranty or
covenant contained herein in any respect, the fact that there exists another
representation, warranty or covenant relating to the same subject matter which
the party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty or covenant.
SECTION 13.3 GOVERNING LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Delaware
without giving effect to the conflicts of laws provisions thereof.
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SECTION 13.4 NOTICES. All notices, consents, requests, instructions,
approvals and other communications which may be or are required to be give,
served or sent by either party pursuant to this Agreement shall be in writing
and shall be delivered personally, or sent by nationally recognized overnight
courier service, or by registered or certified mail, return receipt requested,
postage prepaid, or transmitted by facsimile (and followed with another
acceptable means of notice), addressed as follows: (a) if to the Buyer: 708
Fiero Commerce Park, Suite #5, San Luis Obispo, CA 93401 Attention: Christopher
Gibson and to its counsel: Thomas F. Mulvaney, 3081 Zanker Road, San Jose, CA
95131 (b) if to the Seller or Parent: One Progress Plaza, Suite 210, St.
Petersburg, Florida 233701 with a copy (which shall not constitute notice) to
its counsel: Graven Perry Block Brody & Qualls, 523 West Sixth Street, Suite
1130, Los Angeles, California 90014.
Each party may designate by notice in writing as aforesaid a new
address to which any notice, demand, request or communication may thereafter be
so given, served or sent. Each notice, demand, request or communication which
shall be mailed, sent, delivered, or telefaxed in the manner described above,
shall be deemed sufficiently given, served, sent or received for all purposes
at such time as it is delivered to the addressee (with the return receipt, the
delivery receipt or, with respect to a facsimile the answerback being deemed
conclusive confirmation of such delivery) or at such time as actual delivery is
refused by the addressee upon presentation.
SECTION 13.5 SPECIFIC ENFORCEMENT. The Seller and the Buyer
acknowledge and agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. Accordingly, the parties shall be
entitled to an injunction or injunctions to prevent or to cure breaches of such
provisions and to enforce specifically such terms and provisions, this being in
addition to any other remedy to which they may be entitled at law or in equity.
SECTION 13.6 NO THIRD PARTY BENEFICIARY. this Agreement is entered
into solely for the benefit of the parties hereto, and in the case of Article XI
hereof, the other Indemnified Parties and the provisions of this Agreement shall
be for the sole and exclusive benefit of such parties and their respective
successors and permitted assigns. Nothing expressed or implied herein will be
deemed to create any third party beneficiaries or confer any benefit or rights
on or to any Person not a party hereto (other than in the case of Article XI
hereof, the other Indemnified Parties or their successors and permitted assigns)
and no Person not a party hereto or their successors and permitted assigns
(other than the Indemnified Parties) (including employees or creditors of the
Seller) shall be entitled to enforce any provisions hereof or exercise any right
hereunder.
SECTION 13.7 SALES AND TRANSFER TAXES. All sales and transfer Taxes
(including Taxes, if any, imposed upon the transfer or real and personal
property and other Taxes, filing recording and registration fees and similar
fees payable in connection with the transactions contemplated hereby shall be
paid by the Seller when due on or following the Closing Date. The Seller and
the Parent shall indemnify, reimburse and hold harmless the Buyer in respect of
the liability for payment of or failure to pay any such Taxes or fees or the
filing of or other failure to file any reports or forms required in connection
therewith. The provisions of this Section shall survive the termination of this
Agreement.
SECTION 13.8 RENT, UTILITIES, AND OTHER CHARGES. Except to the extent
reflected in or as prepaid expenses, rent, fees, fuel, utilities, telephone and
other like charges and real and personal property taxes with respect to the
business of the Seller shall be apportioned between the Buyer and the Seller as
of the Closing Date on the basis of the fiscal period for which such charges and
taxes are attributable.
SECTION 13.9 WAIVER. Neither the waiver by either of the parties
hereto of a breach of or a default under any one or more of the provisions of
this Agreement, nor the failure of either of the parties, on one or more
occasions, to enforce any of the provisions of this Agreement or to exercise any
right or privilege hereunder shall thereafter be construed as a waiver of any
subsequent breach or default of a similar nature or as a waiver of any such
provisions, rights or privileges hereunder.
SECTION 13.10 ASSIGNMENT; AMENDMENT. Neither the Buyer nor the Seller
or the Parent shall assign any of its rights or obligations under this Agreement
whether by written agreement of operation of law, without the prior written
consent of the other, except that the Buyer may assign its rights hereunder in
whole or in part to one or more Affiliates of the Buyer provided that the Buyer
shall continue to be obligated to perform all the obligations to be performed by
the Buyer hereunder.
(b) This Agreement shall be binding upon and shall inure to the
benefit of the parties and their respective successors and permitted assigns.
(c) No provision of this Agreement may be amended, modified, waived,
discharged or terminated except by written agreement duly executed by each of
the parties. No waiver by either party of any breach of any provision hereof
shall be deemed to be a continuing waiver thereof in the future or a waiver of
any other provision hereof: nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right accruing to it thereafter.
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SECTION 13.11 ENTIRE AGREEMENT. This Agreement embodies and
constitutes the entire agreement and understanding between the parties with
respect to the subject matter hereof and supersedes and cancels any prior oral
or written agreement, letter of intent, proposal executed or delivered by or on
behalf of any of the parties or understanding related to the subject matter
hereof.
SECTION 13.12 SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be illegal, void or unenforceable, then the remainder of the terms, provisions,
covenants and restrictions of this Agreement shall remain in full force and
effect. Furthermore, in lieu of any such invalid or unenforceable term or
provision, the parties intend that there shall be added as part of this
Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
SECTION 13.13 HEADINGS. The table of contents and headings herein
are for convenience only, do not constitute a part of this Agreement, and shall
nor be deemed to limit or affect any of the provisions hereof or in any way
affect the meaning or interpretation of this Agreement.
SECTION 13.14 PREVAILING PARTY. In the event of a dispute hereunder
or relating to the transactions contemplated hereby, the prevailing party in
such dispute shall be entitled to recover from the other party all of its costs
and expenses incurred in connection with the enforcement of its rights
thereunder, including reasonable attorneys' fees and consist incurred before
and at trial or any other proceeding, at all levels, and whether or not suit or
any other proceeding is brought.
SECTION 13.15 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and it shall not be necessary that the signature of, or on
behalf of, each party, or that the signatures of all persons required to bind
any party, appear on each counterpart, but it shall be sufficient that the
signature of, or on behalf of, each party, or that the signatures of the
persons required to bind any party, appear on one or more such counterparts.
All counterparts shall constitute one and the same instrument, and this
Agreement shall become effective when one or more counterparts have been signed
by each of the parties. It shall not be necessary in making proof of this
Agreement or any counterpart hereof to produce or account for any of the other
counterparts.
IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly
executed by the parties hereto on the day and year first above written.
SYTRON CORPORATION ARCADA SOFTWARE, INC.
By:_____________________ By:_____________________
Name: Name:
Title: Title:
REXON INCORPORATED
By:_____________________
Name:
Title:
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<PAGE> 33
GUARANTY
For a period of one year from the Closing Date, Arcada Holdings,
Inc., a Delaware corporation ("Arcada") the owner of all of the issued and
outstanding shares of capital stock of Arcada Software, Inc. (the "Buyer")
hereby unconditionally guarantees to Rexon Incorporated the ("Parent") and
Sytron Corporation (the "Seller") the full and timely performance of all of the
obligations and agreement of the Buyer contained in the Asset Purchase Agreement
dated as of July 25, 1995, (the "Asset Purchase Agreement") by and among the
Buyer, on the one hand, and the Parent and the Seller on the other hand. The
Parent and the Seller may at their option proceed against Arcada for the
performance of any such obligation or agreement, without first proceeding
against any other party or against any of its properties. This Guaranty shall
not expressly or impliedly confer any rights or remedies on any persons other
than the Parent and the Seller.
STATE OF )
)ss:
COUNTY OF )
On this, the __ day of __________, 1995, before me, a Notary Public in and for
Said County and State, personally appeared _______________ of ________________,
and that such officer, being duly authorized to do so, executed the foregoing
Asset Purchase Agreement for the purposes therein contained by signing the name
of _____________.
_________________________
Notary Public
STATE OF )
)ss:
COUNTY OF )
On this, the __ day of __________, 1995, before me, a Notary Public in and for
Said County and State, personally appeared _______________ of ________________,
and that such officer, being duly authorized to do so, executed the foregoing
Asset Purchase Agreement for the purposes therein contained by signing the name
of _____________.
_________________________
Notary Public
STATE OF )
)ss:
COUNTY OF )
On this, the __ day of __________, 1995, before me, a Notary Public in and for
Said County and State, personally appeared _______________ of ________________,
and that such officer, being duly authorized to do so, executed the foregoing
Asset Purchase Agreement for the purposes therein contained by signing the name
of _____________.
_________________________
Notary Public
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<PAGE> 34
EXHIBITS
Exhibit A - Form of Assumption Agreement
Exhibit B - Form of Bill of Sale
Exhibit C - Form of Contract Assignment
Exhibit D - Form of Copyright Assignment
Exhibit E - Form of Assignment and Assumption of Leases
Exhibit F - Form of License Agreement (omitted)
Exhibit G - Form of Non-Compete Agreement
Exhibit H - Form of Patent Assignment
Exhibit I - Form of Trademark Assignment
Exhibit J - Form of Opinion of Consent to the Seller and the Parent
Exhibit K - Form of Opinion Counsel to the Buyer
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SCHEDULES
Schedule 2.1(a)(i) - Owned Real Property
Schedule 2.1(a)(ii) - Leased Real Property
Schedule 2.1(a)(iii) - Equipment
Schedule 2.1(a)(iv) - Inventory
Schedule 2.1(a)(v) - Assigned Contracts
Schedule 2.1(a)(viii) - Patents
Schedule 2.1(a)(ix) - Trademarks
Schedule 2.1(a)(x) - Copyrights
Schedule 2.1(a)(xv) - Accounts Receivable
Schedule 2.1(a)(xvi) - Computer Programs
Schedule 2.2 - Excluded Assets
Schedule 2.3 - Assumed Liabilities
Schedule 2.4 - Liabilities Not Assumed by Buyer
Schedule 3.6 - Tax Allocation
Schedule 4.1 - Qualifications of Seller
Schedule 4.2 - Non-Contravention
Schedule 4.3 - Consents and Approvals
Schedule 4.5 - Balance Sheet
Schedule 4.6(c) - Leases
Schedule 4.6(d) - Tenancies, Subleases, etc.
Schedule 4.7(a) - Liens or Other Encumbrances
Schedule 4.7(b) - Personal Property Leases
Schedule 4.7(c) - Invention
Schedule 4.7(d) - Accounts
Schedule 4.7(e) - Backlog
Schedule 4.8 - Employees; Labor Matters
Schedule 4.10 - Permits
Schedule 4.11 - Legal Proceedings
Schedule 4.12 - Intellectual Property Rights
Schedule 4.13 - Contracts
Schedule 4.14 - Bank Accounts; Power of Attorney
Schedule 4.15 - Conduct of Business
Schedule 4.18 - Insurance
Schedule 4.19 - Transaction with Affiliates
Schedule 4.20 - Material Adverse
Schedule 4.21 - Location of Assets; D/B/A's
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