EXHIBIT 2.1
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STOCK PURCHASE AGREEMENT
BY AND BETWEEN
CYBEROPTICS CORPORATION
AND
THE SHAREHOLDERS AND CERTAIN OPTION HOLDERS
OF
IMAGENATION CORPORATION
October 24, 2000
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STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of October
24, 2000, is made and entered into by and between CyberOptics Corporation, a
Minnesota corporation ("Buyer"), and each of the shareholders (the
"Shareholders") and the holders of certain options (collectively, the "Sellers")
of Imagenation Corporation, an Oregon corporation (the "Company"), set forth in
the attached Exhibit A.
WHEREAS, Sellers own 2,999,997 shares of class A voting common stock,
without par value, of the Company, constituting all the issued and outstanding
shares of capital stock of the Company (such shares being referred to herein as
the "Shares") and hold options (the "Seller Options") to purchase 1,200,000
shares of the class B nonvoting common stock of the Company, and the other
holders set forth in Exhibit B ("NonSeller OptionHolders") hold options (the
"NonSeller Options" and together with the Seller Options, the "Options") to
purchase shares of the class B nonvoting common stock of the Company, such
Shares and Options constituting all of the outstanding shares of, and all of the
outstanding options, warrants or other rights to acquire, or instruments
convertible into, the capital stock of the Company, in each case in the
respective number of Shares and Seller Options set forth opposite the name of
each Seller on the attached Exhibit A and the number of NonSeller Options set
forth opposite the name of each NonSeller Option Holder in Exhibit B.
WHEREAS, Sellers desire to sell, and Buyer desires to purchase the
Shares and Options on the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE I
SALE OF SHARES AND CLOSING
1.01 PURCHASE AND SALE. Sellers agree to sell to Buyer, and Buyer
agrees to purchase from Sellers and NonSeller OptionHolders, all of the right,
title and interest of Sellers and NonSeller OptionHolders in and to the Shares
and the Options at the Closing (as defined in Section 1.08) on the terms and
subject to the conditions set forth in this Agreement.
1.02 PURCHASE PRICE.
(a) Subject to the adjustment described in clause (b) below, the total
consideration to be paid by Buyer for the Shares and the Options is the sum of:
(i) $6,650,000 (the "Closing Purchase Price"), payable in cash
at the Closing to and for the benefit of the Sellers and NonSeller
OptionHolders in the manner provided in Section 1.06;
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(ii) $350,000 (the "Escrow Amount") to be placed in escrow in
accordance with Section 1.05; and
(ii) an earn-out payable in accordance with Section 1.03
(together with the Closing Purchase Price and the Escrow Amount, the
"Total Consideration").
(b) As promptly as practicable, but not more than forty-five (45) days,
after the Closing Date, Buyer shall prepare, in consultation with the Sellers'
representative appointed pursuant to Section 9.05 (the "Sellers'
Representative") and in conformity with generally accepted accounting principals
("GAAP"), and deliver to the Sellers' Representative, a balance sheet of the
Company as of the close of business on the date immediately preceding the
Closing Date (the "Closing Date Statement"). The costs and expenses of preparing
the Closing Date Statement shall be borne by Buyer, and the costs and expenses
of reviewing the Closing Date Statement, if any, shall be borne by the Sellers
and NonSeller OptionHolders. The Total Consideration shall be decreased, if at
all, but not increased, by the amount (the "Shortfall") by which the Net Assets
as reflected in the Closing Date Statement are less than the Net Assets
reflected on the Latest Balance Sheet (as defined in Section 2.08), provided
that no adjustment shall be made if the Shortfall is less than $100,000.
Acceptance or rejection of the Closing Date Statement and the corresponding
adjustment shall be governed by Section 1.04. Any such adjustment in the Total
Consideration accepted by, or deemed accepted by, the Sellers' Representative
shall be made by payment to Buyer out of the Escrow Account by wire transfer in
immediately available funds within seven (7) days after the Closing Date
Statement is accepted, or deemed accepted, by the Sellers' Representative in
accordance with Section 1.04. For the purposes of this Section 1.02(b), Net
Assets shall mean the difference between the aggregate amount of any and all
assets reflected as assets on a balance sheet and the aggregate amount of any
and all liabilities (current and long-term and whether or not contingent)
reflected as liabilities on a balance sheet.
1.03 EARN-OUT.
(a) Subject to the terms and conditions herein, for each of the twelve
month periods ending December 31, 2001, 2002, and 2003 (each, an "Earn-Out
Period"), but not thereafter, Buyer shall pay and deliver to Sellers and
NonSeller OptionHolders an amount (the "Earn-Out") equal to five percent (5%) of
the Net Sales from New Products during such twelve month period. Within sixty
(60) days following the close of each Earn-Out Period, Buyer shall prepare and
deliver to the Sellers' Representative (i) a summary of Net Sales from New
Products for the Earn-Out Period and (ii) a statement, certified as being true
and correct by an officer of Buyer as to the calculation of the Earn-Out (an
"Earn-Out Statement"). Acceptance or rejection of the Earn-Out Statement shall
be governed by Section 1.04 below. Payment of the Earn-Out shall be made to
Sellers' Representative within seven (7) days after the date an Earn-Out
Statement is accepted or deemed accepted by the Sellers' Representative pursuant
to Section 1.04.
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(b) The Sellers acknowledge that Buyer's obligation to pay the Earn-Out
will be subordinated to any indebtedness for borrowed money incurred by Buyer or
its affiliates with institutional lenders ("Funded Debt") and the Sellers agree
to cooperate with Buyer and the holders of such Funded Debt in connection with
such subordination. For such purposes, subordination shall mean that Funded Debt
shall have prior claim to the Buyer's assets in the event of liquidation or
dissolution of Buyer and that Buyer will not make payments with respect to the
Earn-Out to the extent it is in default of such Funded Debt. Nothing in this
Section 1.03(b) shall limit the obligation of Buyer to pay any amounts due
Sellers under this Section 1.03.
(c) The right to receive the Earn-Out, if any, is personal to the
Sellers and NonSeller OptionHolders and may not be transferred for any reason
other than to a Seller or NonSeller OptionHolders, or to the successors and
assigns of a Seller or NonSeller OptionHolders, by will or the laws of descent
and distribution. Any attempted transfer of the Earn-Out by any holder thereof
(other than as set forth in the preceding sentence) shall be null and void.
(d) The Earn-Out shall represent only a right to receive cash from
Buyer subject to the terms set forth herein. The Earn-Out shall not possess any
attributes of capital stock and shall not entitle Sellers or NonSeller
OptionHolders to any rights of any kind other than as specifically set forth
herein.
(e) The Sellers acknowledge that the Buyer shall have sole and
exclusive control of the operation of the business of the Company after the
Closing Date and nothing contained in this Agreement shall require that the
Buyer or the Company to develop, complete development of, market, or sell any
New Product. Sellers acknowledge that the Buyer may reduce expenditures on, or
cease any development, marketing, or sale of any New Product at any time for any
reason in the Buyer's sole discretion, and that Buyer shall have no liability
resulting from any such termination, or any other decision relating to the New
Products, regardless of the affect any Earn-Out Payment.
(f) Notwithstanding any provision in this Agreement to the contrary, in
the event that a Seller violates any provision of the Related Agreements (as
defined in Section 8.03), no Earn-Out payments shall be due that Seller;
provided, however, that the violation by one Seller of a Related Agreement shall
not affect the obligation of the Buyer to pay the Earn-Out to other Sellers.
(g) For purposes of this Agreement, the following terms have the
meanings set forth in this Section 1.03(g):
(i) "Net Sales" shall mean, with respect to sales of any New
Products during any Earn-Out Period, an amount equal to (A) the sales
revenue recognized in accordance with GAAP and the normal revenue
recognition policies of the Buyer during the Earn-Out Period with
respect to sale of New Products, less (B) any discounts, rebates or
give-backs with respect to such sales, to the extent
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reflected in sales revenue, less (C) sales revenue recognized in the
Earn-Out Period, or in any prior period, for any New Products that are
returned during the Earn-Out Period or, with respect to the last
Earn-Out period, within 30 days after the end of the Earn-Out Period,
and less (D) any commissions or other sales compensation paid to sales
representatives or agents. In the calculation of Net Sales, there shall
be no inclusion of any gain or loss from any sale, exchange or other
disposition of tangible assets other than in the ordinary course of
business, but revenue from licenses and sales of intellectual property
rights shall be included. The calculation of Net Sales shall be
determined based on the books and records of the Buyer, maintained in a
manner consistent with the audited consolidated financial statements of
Buyer and with GAAP consistently applied.
(ii) "New Company Products" shall mean the new vision
cell/wafer mapping products that are currently under development by the
Company, and derivatives of such products.
(iii) "New Products" shall mean (x) New Company Products; and
(y) other new products that are not Old Products and that are designed
for semiconductor device fabrication, or inspection during
semiconductor device fabrication, after the date of this Agreement by
the Company or by Hama Sensors, Inc., a subsidiary of the Buyer, or by
the Buyer to the extent such new products are developed by, or with
substantial assistance from, persons who are employees of the Company
on the Closing Date. For such purposes, semiconductor device
fabrication shall include wafer fabrication, the placement of
semiconductor die (diced semiconductor wafer chips) into component
packages and similar assembly and fabrication of semiconductor chip
components, and the attachment of leads to diced silicon wafer chips,
and but shall not include the assembly of electronic devices that
incorporate packaged semiconductor chips or the placement of packaged
semiconductor chips and other components on circuit boards.
(iv) "Old Products" shall mean (x) any products of the Company
or the Buyer (including any of their respective subsidiaries) that are
in commercial production on the date of this Agreement, including
current frame grabber products of the Company, and including the frame
grabber under development code named "bluebird" project (collectively,
"Existing Products"), (y) any product under development by the Buyer or
its subsidiaries on the date of the Agreement (a "Buyer Product"), (z)
or any products that are derivative of any Existing Product or Buyer
Product.
1.04 ACCEPTANCE AND REJECTION PROCEDURES.
(a) Each of the Closing Date Statement and the Earn-Out Statements
shall be subject to review by the Sellers' Representative or, at the election of
the Sellers' Representative and at the expense of the Sellers and NonSeller
OptionHolders, by an independent public
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accounting firm of his choice. Buyer shall permit the Sellers' Representative
and his representatives to have reasonable access during normal business hours
to all relevant accounting records, data and information upon which the Closing
Date Statement and Earn-Out Statement was prepared and to Buyer's employees
and/or representatives who assisted in its preparation. The Sellers'
Representative shall be deemed to have accepted the Closing Date Statement and
any Earn-Out Statement unless, within twenty (20) days after the date of
delivery of the same, the Sellers' Representative gives written notice (the
"Objection Notice") to Buyer of objection to any item thereon, which notice
shall specify in reasonable detail the basis for such objection. If the Sellers'
Representative gives an Objection Notice, Buyer and the Sellers' Representative
shall attempt in good faith to resolve the dispute as promptly as possible,
subject to the terms of Section 1.04(b).
(b) If Buyer and the Sellers' Representative have not been able to
agree upon a resolution of a dispute within thirty (30) days after the date of
the Objection Notice (which thirty (30) day period may be extended by written
agreement of the parties), such dispute shall be resolved fully, finally and
exclusively through use of a mutually agreeable national independent accounting
firm ("Independent Accounting Firm"), and such determination shall be final and
binding on the parties. If the Sellers' Representative and Buyer cannot mutually
agree on the identity of the Independent Accounting Firm, then the Sellers'
Representative and Buyer shall each submit to the other party's independent
auditor the name of a national accounting firm, and the Independent Accounting
Firm shall be selected by lot from those two firms by the independent auditors
of the two parties. If no national accounting firm shall be willing to serve as
the Independent Accounting Firm, then an arbitrator shall be selected to serve
as such, such selection to be according to the above procedures. The costs of
the Independent Accounting Firm or the arbitrator, as the case may be, shall be
apportioned between the Sellers and NonSeller OptionHolders on the one hand and
Buyer on the other hand as determined by the Independent Accounting Firm or the
arbitrator, as the case may be, in such manner as such entity deems reasonable
taking into account the circumstances of the case, the conduct of the parties
during the proceeding and the result of the proceeding. Any such proceeding
shall be concluded in a maximum of two (2) months from the date of the Objection
Notice. All negotiations pursuant to this Section 1.04 shall be treated as
compromise and settlement negotiations for purposes of all federal, foreign,
state and local rules of evidence, and all negotiations and proceedings under
this Section 1.04 shall be treated as confidential information. The procedures
of Section 1.04 are exclusive and shall be fully exhausted prior to the
initiation of any litigation. The Independent Accounting Firm's or the
arbitrator's, as the case may be, decision may be filed as a judgment in any
court of competent jurisdiction. Either party may seek specific enforcement or
take other necessary legal action to enforce any decision under this Section
1.04. Any such request for specific enforcement or other legal action shall not
be subject to the mandatory arbitration provisions of Article X. The other
party's only defense to such a request for specific enforcement or other legal
action shall be fraud by or on the Independent Accounting Firm or the
arbitrator, as the case may be.
1.05 ESCROW AMOUNT. On the Closing Date, Buyer shall deposit the Escrow
Amount into an escrow account (the "Escrow Account") pursuant to the terms of
the escrow
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agreement substantially in the form attached as Exhibit C hereto (the "Escrow
Agreement"). Upon the terms and subject to the conditions set forth in the
Escrow Agreement, the Escrow Amount shall be held in escrow for a period of one
year from the Closing Date.
1.06 PAYMENTS AMONG SELLERS. All payments to the Shareholders of the
portion of the Closing Purchase Price set forth opposite their respective names
in the attached Exhibit A shall be made by Buyer directly to the Shareholders or
to the account of such Shareholders at Closing. All payments to the holders of
Options of their share of the Closing Purchase Price, which is limited to the
Cash Option Payment as defined in Exhibit F, shall be made to an account of the
Company and shall be distributed by the Sellers' Representative from such
account after subtraction for appropriate payroll withholding, to the holders of
Options. Each of the Sellers agrees that the Buyer shall subtract from the
Closing Purchase Price the expenses related to the purchase of the Shares and
the Options (hereafter, the "Sellers' Expenses") set forth in a closing
certificate to be provided to the Buyer at Closing (the "Expense Certificate")
and shall pay to the Sellers each Sellers' portion of the Closing Purchase Price
net of the pro rata share of each such Seller of such Sellers' Expenses. The
Buyer hereby agrees to pay, on the Closing Date, the Sellers' Expenses (but no
more than the Sellers' Expenses) to the persons and entities set forth in such
Expense Certificate. Each Seller hereby confirms that payment in accordance with
this Section 1.06 shall be considered payment of the Closing Purchase Price to
such Seller and that confirmation by the Sellers' Representative of receipt to
the account designated by the Shareholders, and to the account of the Company
for further distribution to holders of Options, shall be considered receipt and
acceptance of the Closing Purchase Price by the Sellers. Each payment of the
Earn-Out shall be made directly to the Sellers and NonSeller OptionHolders
within seven days of acceptance, or deemed acceptance, of the Earn-Out Statement
in accordance with Section 1.04. Payment of the Earn-Out to Optionholders will
be net of any required payroll and withholding taxes, as provided in Exhibit F.
Distributions from the Escrow Account, shall be made directly to the Sellers in
accordance with their interests therein, as specified in the Escrow Agreement.
1.07 RIGHT OF SET-OFF. Buyer may set-off any amounts to which it may be
entitled under the terms of this Agreement against amounts otherwise payable
under this Article I. Neither the exercise of, nor the failure to exercise such
right of set-off will constitute an election of remedies or limit Buyer in any
manner in the enforcement of any other remedies that may be available to it
hereunder.
1.08 THE CLOSING.
(a) The closing of the transactions contemplated by this Agreement (the
"Closing") will take place at the offices of the Company at 10220 SW Nimbus,
Suite K5, Portland, OR 97223, at 10:00 a.m. on October 24, 2000 (the "Closing
Date"), or at such other place and on such other date as is mutually agreeable
to Buyer and Sellers' Representative. The Closing will be effective as of the
close of business on the Closing Date.
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(b) Subject to the conditions set forth in this Agreement, the parties
agree to consummate the following "Closing Transactions" on the Closing Date:
(i) Sellers will assign and transfer to Buyer good and valid
title in and to the Shares and Seller Options, free and clear of all
liens, by (x) delivering to Buyer a stock certificate or certificates
representing the Shares, duly endorsed for transfer or accompanied by
duly executed stock powers endorsed in blank with requisite stock
transfer tax stamps, if any, attached and (y) surrendering for
cancellation each Seller Option;
(ii) The NonSeller OptionHolders shall surrender all the
NonSeller Options for cancellation;
(iii) Buyer shall deliver to the Sellers' Representative the
Closing Purchase Price by wire transfer of immediately available funds
to the account designated by Sellers' Representative to Buyer prior to
the Closing; and
(iv) Each of the parties shall deliver to the other the
documents required to be delivered pursuant to Article VI hereof.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLERS
As a material inducement to Buyer to enter into this Agreement, with
the understanding that Buyer will be relying thereon in consummating the
transactions contemplated hereunder, and except as set forth in the disclosure
schedule delivered by the Sellers to Buyer on the date hereof (the "Disclosure
Schedule") (which Disclosure Schedule sets forth the exceptions to the
representations and warranties contained in this Article II under captions
referencing the Sections to which such exceptions apply), each of the Sellers
jointly and severally hereby makes the representations and warranties set forth
in this Article II:
2.01 INCORPORATION AND CORPORATE POWER. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Oregon and has the corporate power and authority and all
authorizations, licenses, permits and certifications necessary to own and
operate its properties and to carry on its business as now conducted and
presently proposed to be conducted, except where the failure to have such
authorizations, licenses permits and certifications would not, individually or
in the aggregate, have a material adverse effect on the Company's business or
results of operations. The copies of the Company's Articles of Incorporation and
Bylaws which have been furnished by the Company to Buyer prior to the date
hereof reflect all amendments made thereto with are correct and complete as of
the date hereof. The Company is qualified to do business as a foreign
corporation in every jurisdiction in which the nature of its business or its
ownership of property requires it to be so qualified except
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for those jurisdictions in which the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
Company's business or results of operations.
2.02 EXECUTION, DELIVERY; VALID AND BINDING AGREEMENTS. The execution,
delivery and performance of this Agreement by each Seller and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
all requisite action, and no other proceedings on the part of any Seller are
necessary to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly executed and delivered by each Seller
and constitutes the valid and binding obligation of each Seller, enforceable in
accordance with its terms.
2.03 NO BREACH. The execution, delivery and performance of this
Agreement by each Seller and the consummation by each Seller of the transactions
contemplated hereby do not conflict with or result in any breach of any of the
provisions of, constitute a default under, result in a violation of, result in
the creation of a right of termination or acceleration or any lien, security
interest, charge or encumbrance upon any of the Shares or any assets of the
Company, or require any authorization, consent, approval, exemption or other
action by or notice to any court or other governmental body, under the
provisions of the Articles of Incorporation or Bylaws of the Company or any
indenture, mortgage, lease, loan agreement or other agreement or instrument by
which the Company is bound or affected, or any law, statute, rule or regulation
or order, judgment or decree to which any Seller or the Company is subject.
2.04 GOVERNMENTAL AUTHORITIES; CONSENTS. The Company is not required,
and no Seller is required, to submit any notice, report or other filing with any
governmental authority in connection with the execution or delivery by any
Seller of this Agreement or the consummation of the transactions contemplated
hereby. Except as set forth in the Disclosure Schedule under the caption
referencing this Section 2.04, no consent, approval or authorization of any
governmental or regulatory authority or any other party or person is required to
be obtained by any Seller or by the Company in connection with its execution,
delivery and performance of this Agreement or the transactions contemplated
hereby.
2.05 OWNERSHIP OF CAPITAL STOCK. Each Seller owns, beneficially and of
record, all right, title and interest in and to the Shares or the Options, or
both, set forth opposite the name of such Seller in the attached Exhibit A, free
and clear of any security interests, claims, liens, pledges, options,
encumbrances, charges, agreements, voting trusts, proxies or other arrangements,
restrictions or limitations of any kind, and, on the Closing Date, the delivery
by Seller of a certificate or certificates in the manner set forth in Section
1.08(b) hereof will transfer good and valid title to the Shares to Buyer, free
and clear of any security interests, claims, liens, pledges, options,
encumbrances, charges, agreements, voting trusts, proxies or other arrangements,
restrictions or other legal or equitable limitations of any kind, and the
delivery of the Options for cancellation will constitute cancellation and
relinquishment of the rights of each Seller and NonSeller Option Holder in and
with respect to such Option.
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2.06 SUBSIDIARIES. The Company does not own any stock, partnership
interest, joint venture interest or any other security or ownership interest
issued by any other corporation, organization or entity.
2.07 CAPITAL STOCK. The authorized capital stock of the Company
consists of 3,000,000 shares of Class A Voting Common Stock (the "Class A
Stock") and 2,000,000 shares of Class B Nonvoting Common Stock (the "Class B
Stock"). As of the date hereof, there are 2,999,997 shares of Class A Stock
issued and outstanding, all of which are owned beneficially and of record by
Sellers in the amounts set forth in Exhibit A, free and clear of any security
interests, claims, liens, pledges, options, encumbrances, charges, agreements,
voting trusts, proxies or other arrangements, restrictions or other legal or
equitable limitations of any kind. There are no shares of Class B Stock, or any
class or series of capital stock of the Company, outstanding. All of the shares
of Class A Stock have been duly authorized and are validly issued, fully paid
and nonassessable. Except for the Options, the Company has no other equity
securities or securities containing any equity features authorized, issued or
outstanding. The Company has duly reserved 1,509,000 shares of Class B Stock for
issuance upon exercise of the Options, all of which Options are held
beneficially of record by the Sellers in the amounts set forth in Exhibit A and
the NonSeller OptionHolders in the amounts set forth in Exhibit B, free and
clear of any security interests, claims, liens, pledges, encumbrances, charges,
restrictions or equitable limitations of any kind, except those created by the
agreement representing such option and the Company's Stock Incentive Plan.
Except for the Options, there are no agreements or other rights or arrangements
existing which provide for the sale or issuance of capital stock by the Company
and there are no rights, subscriptions, warrants, options, conversion rights or
agreements of any kind outstanding to purchase or otherwise acquire from the
Company any shares of capital stock or other securities of the Company of any
kind. There are no agreements or other obligations (contingent or otherwise)
that may require the Company to repurchase or otherwise acquire any shares of
its capital stock.
2.08 FINANCIAL STATEMENTS. Sellers have delivered to Buyer copies of
(a) the unaudited balance sheet, as of August 31, 2000, of the Company (the
"Latest Balance Sheet") and the unaudited statements of earnings of the Company
for the eight and ten-month periods ended August 31, 2000 (such statements and
the Latest Balance Sheet being herein referred to as the "Latest Financial
Statements") and (b) the balance sheets, as of October 31, 1999 and 1998 of the
Company and the statements of earnings, shareholders' equity and cash flows of
the Company for each of the years ended October 31, 1999 and 1998, with the
review report of KPMG LLP thereon (collectively, the "Annual Financial
Statements"). Except as set forth in the Disclosure Schedule referencing this
Section 2.08, the Latest Financial Statements and the Annual Financial
Statements are based upon the information contained in the books and records of
the Company and fairly present the financial condition of the Company as of the
dates thereof and results of operations for the periods referred to therein. The
Annual Financial Statements have been prepared in accordance with generally
accepted accounting principles, consistently applied throughout the periods
indicated. Except as set forth in the Disclosure Schedule referencing this
Section 2.08, the Latest Financial Statements have been prepared consistent with
the Annual
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Financial Statements and reflect all adjustments necessary to a fair statement
of the results for the interim period(s) presented.
2.09 ABSENCE OF UNDISCLOSED LIABILITIES. Except as reflected in the
Latest Balance Sheet, the Company has no liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise, whether due or to become due, whether
known or unknown, and regardless of when asserted) arising out of transactions
or events heretofore entered into, or any action or inaction, or any state of
facts existing, with respect to or based upon transactions or events heretofore
occurring, except (i) liabilities which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business (none of which is a material
uninsured liability for breach of contract, breach of warranty, tort,
infringement claim or lawsuit), or (ii) as otherwise set forth in the Disclosure
Schedule under the caption referencing this Section 2.09.
2.10 NO MATERIAL ADVERSE CHANGES. Since the date of the Latest Balance
Sheet (the "Balance Sheet Date"), there has been no material adverse change in
the assets, financial condition, operating results, customer, employee or
supplier relations, business condition or prospects of the Company.
2.11 ABSENCE OF CERTAIN DEVELOPMENTS. Since the Balance Sheet Date, the
business of the Company has been operated in the ordinary course, consistent
with past practices. As amplification and not limitation of the foregoing, since
the Balance Sheet Date, the Company has not:
(a) borrowed any amount or incurred or become subject to any liability
or obligation in excess of $1,000 (whether absolute, accrued, contingent or
otherwise and whether due or to become due), except (i) current liabilities
incurred in the ordinary course of business consistent with past practices, and
(ii) liabilities under contracts entered into in the ordinary course of business
consistent with past practices;
(b) mortgaged, pledged or subjected to any lien, charge or any other
encumbrance, any of its assets, except (i) liens for current property taxes not
yet due and payable, (ii) liens imposed by law and incurred in the ordinary
course of business consistent with past practices for obligations not yet due to
carriers, warehousemen, laborers, materialmen and the like, (iii) liens in
respect of pledges or deposits under workers' compensation laws or (iv) liens
set forth in Section 2.11 in the Disclosure Schedule, all of which liens in
clauses (i) through (iv) are less than $10,000 in the aggregate;
(c) discharged or satisfied any lien or encumbrance or paid any
liability, in each case with a value in excess of $3,000, other than current
liabilities paid in the ordinary course of business consistent with past
practices;
(d) sold, assigned, leased, licensed, transferred or otherwise disposed
of (including, without limitation, transfers to any employees, affiliates or
shareholders) any tangible assets which, individually or in the aggregate, have
a fair market value in excess of $1,000 or
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canceled any debts or claims, in each case, except in the ordinary course of
business consistent with past practices;
(e) sold, assigned, leased, licensed, transferred or otherwise disposed
of (including, without limitation, transfers to any employees, affiliates or
shareholders) any patents, trademarks, trade names, copyrights, trade secrets or
other intangible assets;
(f) disclosed to any person, other than Buyer or authorized
representatives of Buyer, any proprietary confidential information, other than
pursuant to a confidentiality agreement prohibiting the use and further
disclosure of such information, which agreements are identified in Section 2.11
of the Disclosure Schedule and are in full force and effect on the date hereof;
(g) waived any rights of material value or suffered any extraordinary
losses or adverse changes in collection loss experience;
(h) taken any other action or entered into any other transaction other
than in the ordinary course of business consistent with past practices, or
entered into any transaction with any "insider" (as defined in Section 2.23)
other than the transactions contemplated by this Agreement;
(i) suffered any material theft, damage, destruction, casualty or loss
of or to any property or properties owned or used by it, whether or not covered
by insurance;
(j) made, granted, promised or announced any bonus or any wage, salary
or compensation increase to any director, officer, or employee, or consultant or
made or granted any increase in any employee benefit plan or arrangement, or
amended or terminated any existing employee benefit plan or arrangement, or
adopted any new employee benefit plan or arrangement, or made any commitment or
incurred any liability to any labor organization, except for the wage, salary or
compensation increases set forth in Section 2.11 of the Disclosure Schedule;
(k) made any single capital expenditure or commitment therefor in
excess of $5,000;
(l) made any loans or advances to, or guarantees for the benefit of,
any persons such that the aggregate amount of such loans, advances or guarantees
at any time outstanding is in excess of $1,000;
(m) made charitable contributions or pledges which, individually or in
the aggregate, exceed $1,000;
(n) made any change in accounting or tax principles or practices from
those utilized in the preparation of the Latest Financial Statements or the
Returns referred to in Section 2.15(a);
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(o) experienced any amendment, modification or termination of any
existing, or entered into any new, contract, agreement, plan, lease, license,
permit or franchise which is, either individually or in the aggregate, material
to its business, operations, financial position or prospects other than in the
ordinary course of business consistent with past practices;
(p) experienced any labor dispute material to its business, operations,
financial position or prospects;
(q) other than in the ordinary course of business consistent with past
practice, experienced any change in any assumption underlying or method of
calculating, any bad debt, inventory, warranty, contingency or other reserve;
(r) written off as uncollectible any note or account receivable, or
canceled any debts, other than in the ordinary course of business consistent
with past practices;
(s) failed to replace or replenish inventory or supplies as such
inventory or supplies may have been depleted from time to time, collect accounts
receivable, pay accounts payable or shorten or lengthen the customary payment
cycles for any of its payables or receivables or otherwise manage its working
capital accounts in the ordinary course of business consistent with past
practices;
(t) other than in the ordinary course of business consistent with past
practice, experienced any write-down or write-up of the value of any
inventories, receivables or other assets, or revalued any of its assets;
(u) failed to maintain all material assets in accordance with good
business practice and in good operating condition and repair, ordinary wear and
tear excepted; or
(v) other than in the ordinary course of business consistent with past
practice, discontinued or altered, in any material respect, its advertising or
promotional activities or its pricing and purchasing policies.
2.12 TITLE TO PROPERTIES.
(a) The Company does not own any real property. The real property
demised by the leases (the "Leases") described under the caption referencing
this Section 2.12 in the Disclosure Schedule constitutes all of the real
property used or occupied by the Company (the "Real Property"). The Real
Property has access, sufficient for the conduct of the Company's business as now
conducted or as presently proposed to be conducted, to public roads and to all
utilities, including electricity, sanitary and storm sewer, potable water,
natural gas and other utilities, used in the operation of the business of the
Company at that location.
(b) The Leases are in full force and effect, and the Company holds a
valid and existing leasehold interest under each of the Leases for the term set
forth under such caption in the
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Disclosure Schedule. The Company has delivered to Buyer complete and accurate
copies of each of the Leases, and none of the Leases has been modified in any
respect, except to the extent that such modifications are disclosed by the
copies delivered to Buyer. The Company is not in default, and no circumstances
exist which, if unremedied, would, either with or without notice or the passage
of time or both, result in such default under any of the Leases; nor, to the
knowledge of the Sellers, is any other party to any of the Leases in default.
(c) The Company owns good and marketable title to each of the tangible
properties and tangible assets reflected on the Latest Balance Sheet or acquired
since the date thereof, free and clear of all liens and encumbrances, except for
(i) liens for current taxes not yet due and payable, (ii) liens set forth under
the caption referencing this Section 2.12 in the Disclosure Schedule, (iii) the
properties subject to the Leases, (iv) assets disposed of since the date of the
Latest Balance Sheet in the ordinary course of business, (v) liens imposed by
law and incurred in the ordinary course of business for obligations not yet due
to carriers, warehousemen, laborers and materialmen and (vi) liens in respect of
pledges or deposits under workers' compensation laws, all of which liens
aggregate less than $3,000.
(d) All of the buildings, machinery, equipment and other tangible
assets necessary for the conduct of the Company's business are in good condition
and repair, ordinary wear and tear excepted, and are usable in the ordinary
course of business. There are no defects in such assets or other conditions
relating thereto which, in the aggregate, materially adversely affect the
operation or value of such assets. The Company owns, or leases under valid
leases, all buildings, machinery, equipment and other tangible assets necessary
for the conduct of its business.
(e) To the knowledge of the Sellers, the Company is not in violation of
any applicable zoning ordinance or other law, regulation or requirement relating
to the operation of any properties used in the operation of its business, and
none of the Sellers nor, to the knowledge of the Sellers, the Company have
received any notice of any such violation, or the existence of any condemnation
proceeding with respect to any of the Real Property, except, in each case, with
respect to violations the potential consequences of which do not or will not
have a material adverse effect on the Company.
(f) No Seller has knowledge of improvements made or contemplated to be
made by any public or private authority, the costs of which are to be assessed
as special taxes or charges against any of the Real Property, and there are no
present assessments.
2.13 ACCOUNTS RECEIVABLE. The accounts receivable reflected on the
Latest Balance Sheet are valid receivables, are not subject to valid
counterclaims or setoffs, and are collectible in accordance with their terms,
except as otherwise described in the Disclosure Schedule under the caption
referencing this Section 2.13, and except to the extent of the bad debt reserve
reflected on the Latest Balance Sheet.
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2.14 INVENTORY. The Company's inventory of raw materials, work in
process and finished goods consists of items of a quality and quantity usable
and, with respect to finished goods only, salable at the Company's normal profit
levels, in each case, in the ordinary course of the Company's business. Except
as set forth in Section 2.14 to the Disclosure Schedule, the Company's inventory
of finished goods is not slow-moving as determined in accordance with past
practices, obsolete or damaged and is merchantable and fit for its particular
use. The Company has on hand or has ordered and expects timely delivery of such
quantities of raw materials and has on hand such quantities of work in process
and finished goods as are reasonably required timely to fill current orders on
hand which require delivery within 60 days and to maintain the manufacture and
shipment of products at its normal level of operations. As of the date of the
Latest Balance Sheet, the values at which such inventory is carried on the
Latest Balance Sheet have been determined in a manner that is consistent with
the Annual Financial Statements. The Disclosure Schedule, under the caption
referencing this Section 2.14, contains a materially complete and accurate
summary of the Company's inventory of raw materials, work in progress and
finished goods as of August 31, 2000.
2.15 TAX MATTERS.
(a) Each of the Company and any subsidiary, any affiliated, combined or
unitary group of which the Company or any subsidiary is or was a member, any
"Plans" (as defined in Section 2.21 hereof), as the case may be (each, a "Tax
Affiliate" and, collectively, the "Tax Affiliates"), has: (i) timely filed (or
has had timely filed on its behalf) all returns, declarations, reports,
estimates, information returns, and statements ("Returns") required to be filed
or sent by it in respect of any "Taxes" (as defined in subsection (o) below) or
required to be filed or sent by it by any taxing authority having jurisdiction;
(ii) timely and properly paid (or has had paid on its behalf) all Taxes shown to
be due and payable on such Returns; (iii) established on its Latest Balance
Sheet reserves that are adequate for the payment of any Taxes not yet due and
payable in a manner that is consistent with the Annual Financial Statements;
(iv) complied with all applicable laws, rules, and regulations relating to the
withholding of Taxes and the payment thereof (including, without limitation,
withholding of Taxes under Sections 1441 and 1442 of the Internal Revenue Code
of 1986, as amended (the "Code"), or similar provisions under any foreign laws),
and timely and properly withheld from individual employee wages and paid over to
the proper governmental authorities all amounts required to be so withheld and
paid over under all applicable laws.
(b) There are no liens for Taxes upon any assets of the Company or of
any Tax Affiliate, except liens for Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted or assessed
against the Company or the Tax Affiliates that has not been resolved and paid in
full. No waiver, extension or comparable consent given by the Company or the Tax
Affiliates regarding the application of the statute of limitations with respect
to any Taxes or Returns is outstanding, nor is any request for any such waiver
or consent pending. There has been no Tax audit or other administrative
proceeding or court proceeding with regard to any Taxes or Returns, nor is any
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such Tax audit or other proceeding pending, nor has there been any notice to the
Company by any Taxing authority regarding any such Tax, audit or other
proceeding, or, to the knowledge of the Sellers, is any such Tax audit or other
proceeding threatened with regard to any Taxes or Returns. The Company does not
expect the assessment of any additional Taxes of the Company or the Tax
Affiliates and is not aware of any unresolved questions, claims or disputes
concerning the liability for Taxes of the Company or the Tax Affiliates which
would exceed the estimated reserves established on its books and records.
(d) Neither the Company nor any Tax Affiliate is a party to any
agreement, contract or arrangement that would result, separately or in the
aggregate, in the payment of any "excess parachute payments" within the meaning
of Section 280G of the Code and the consummation of the transactions
contemplated by this Agreement will not be a factor causing payments to be made
by the Company or any Tax Affiliate that are not deductible (in whole or in
part) under Section 280G of the Code.
(e) Neither the Company nor any Tax Affiliate has requested any
extension of time within which to file any Return, which Return has not since
been filed.
(f) No property of the Company or any Tax Affiliate is property that
the Company or any Tax Affiliates is or will be required to treat as being owned
by another person under the provisions of Section 168(f)(8) of the Code (as in
effect prior to amendment by the Tax Reform Act of 1986) or is "tax-exempt use
property" within the meaning of Section 168 of the Code.
(g) Neither the Company nor any Tax Affiliate is required to include in
income any adjustment under Section 481(a) of the Code by reason of a voluntary
change in accounting method initiated by the Company or any Tax Affiliate as a
result of the Tax Reform Act of 1986 and none of the Sellers has knowledge that
the Internal Revenue Service has proposed any such adjustment or change in
accounting method.
(h) All transactions that could give rise to an understatement of
federal income tax (within the meaning of Section 6661 of the Code as it applied
prior to repeal) or an underpayment of tax (within the meaning of Section 6662
of the Code) were reported in a manner for which there is substantial authority
or were adequately disclosed (or, with respect to Returns filed before the
Closing Date, will be reported in such a manner or adequately disclosed) on the
Returns required in accordance with Sections 6661(b)(2)(B) and 6662(d)(2)(B) of
the Code.
(i) Neither the Company nor any Tax Affiliate has engaged in any
transaction that would result in a deemed election under Section 338(e) of the
Code, and prior to Closing, neither the Company nor any Tax Affiliate will
engage in any such transaction within any applicable "consistency period" (as
such term is defined in Section 338 of the Code).
(j) Neither the Company nor any Tax Affiliate has filed any consent
under Section 341(f) of the Code.
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(k) The Company and the Tax Affiliates have evidence of payment for all
taxes, charges, fees, levies, or other assessments of a foreign country paid or
accrued from the date of the formation of each of them, respectively.
(l) The Company and the Tax Affiliates (other than the Plans) are, and
at all times have been, corporations or associations taxable as corporations for
United States income tax purposes.
(m) All deductions claimed or reported on all Returns of the Company
and any Tax Affiliate on account of royalties or similar fees payable with
respect to any intellectual property of the Company or any other party are
allowable in full.
(n) For purposes of this Agreement, the term "Taxes" means all taxes,
charges, fees, levies, or other assessments, including, without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, withholding, payroll, employment, social security,
unemployment, excise, estimated, severance, stamp, occupation, property, or
other taxes, customs duties, fees, assessments, or charges of any kind
whatsoever, including, without limitation, all interest and penalties thereon,
and additions to tax or additional amounts imposed by any taxing authority,
domestic or foreign, upon the Company or any Tax Affiliate.
2.16 CONTRACTS AND COMMITMENTS.
(a) Section 2.16 of the Disclosure Schedule lists the following
agreements, whether oral or written, to which the Company is a party and which
are currently in effect:
(i) bonus, pension, profit sharing, retirement or other form
of deferred compensation plan, other than as described in Section 2.21
of the Disclosure Schedule (or excluded by Section 2.21 from inclusion
thereunder);
(ii) hospitalization insurance or other welfare benefit plan
or practice, whether formal or informal, other than as described in
Section 2.21 of the Disclosure Schedule (or excluded by Section 2.21
from inclusion thereunder);
(iii) stock purchase plan, stock option plan or other
equity-based benefit plan;
(iv) contract for the employment of any officer, individual
employee or other person on a full-time or consulting basis or relating
to severance pay for any such person;
(v) confidentiality agreement;
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(vi) agreement or indenture relating to the borrowing of money
or to mortgaging, pledging or otherwise placing a lien on any of the
assets of the Company;
(vii) guaranty by the Company, or by any Seller on behalf of
the Company, of any obligation for borrowed money or otherwise;
(viii) lease or agreement under which the Company is lessee
of, or holds or operates any property, real or personal, owned by any
other party, for which the annual rental exceeds $1,000, other than as
described in Section 2.12 of the Disclosure Schedule;
(ix) lease or agreement under which the Company is lessor of,
or permits any third party to hold or operate, any property, real or
personal, for which the annual rental exceeds $1,000 other than as
described in Section 2.12 of the Disclosure Schedule;
(x) contract or group of related contracts with the same party
for the purchase of products or services under which the undelivered
balance of such products or services is in excess of $1,000 (other than
purchase orders entered into in the ordinary course of business
consistent with past practices);
(xi) contract or group of related contracts with the same
party for the sale of products or services under which the undelivered
balance of such products or services has a sales price in excess of
$2,000 (other than purchase orders entered into in the ordinary course
of business consistent with past practices);
(xii) contract or group of related contracts with the same
party (other than any contract or group of related contracts for the
purchase or sale of products or services) continuing over a period of
more than six months from the date or dates thereof, not terminable by
it on 30 (thirty) days' or less notice without penalty and involving
more than $1,000;
(xiii) contract or group of related contracts with the same
party calling for any rebates, allowances, discounts, performance money
or compensation of any type previously paid or granted or to be paid or
granted to or by the Company;
(xiv) contract which prohibits the Company from freely
engaging in business anywhere in the world;
(xv) license agreement or agreement providing for the payment
or receipt of royalties or other compensation by the Company in
connection with the intellectual property rights listed in Section 2.17
of the Disclosure Schedule;
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(xvi) contract or commitment for capital expenditures in
excess of $5,000;
(xvii) agreement for the sale of any capital asset;
(xviii) contract with any affiliate which in any way relates
to the Company (other than for employment on customary terms); or
(xix) other agreement which is either material to the business
of the Company or the transactions contemplated hereby or which was not
entered into in the ordinary course of business consistent with past
practices.
(b) The Company has performed all material obligations required to be
performed by it in connection with the contracts or commitments required to be
disclosed in the Disclosure Schedule under the caption referencing this Section
2.16 and is not in receipt of any claim of default under any contract or
commitment required to be disclosed under such caption; the Company has no
present expectation or intention of not fully performing any material obligation
pursuant to any contract or commitment required to be disclosed under such
caption; and the Sellers have no knowledge of any breach or anticipated breach
by any other party to any contract or commitment required to be disclosed under
such caption.
(c) Prior to the date of this Agreement, Sellers have made available to
Buyer a true and correct copy of each written contract or commitment, and a
written description of each oral contract or commitment, referred to under the
caption referencing this Section 2.16 in the Disclosure Schedule, together with
all amendments, waivers or other changes thereto.
2.17 INTELLECTUAL PROPERTY RIGHTS. (a) Section 2.17 of the Disclosure
Schedule lists all rights in patents, patent applications, trademarks, service
marks, trade names, corporate names, copyrights, mask works or trade secrets
owned by, licensed to or otherwise controlled by the Company or known by the
Sellers to be necessary for the conduct of the Company's business (the
"Intellectual Property Rights"), except that any such Intellectual Property
Rights relating to New Company Products shall be omitted from such Schedule. The
Company owns and possesses all right, title and interest, or holds a valid
license, in and to the Intellectual Property Rights. Section 2.17 of the
Disclosure Schedule sets forth all products marketed or that have been marketed
by the Company within the past two years and identifies the Intellectual
Property Rights pertaining to each product. Section 2.17 of the Disclosure
Schedule lists all Intellectual Property Rights which have been licensed to
third parties (other than licenses to end-users in accordance with a shrink-wrap
license in the ordinary course of business) and those Intellectual Property
Rights which are licensed from third parties (other than shrink-wrap licenses
obtained in the ordinary course of business). Except as disclosed in Section
2.17 of the Disclosure Schedule, the Company has the right to assign and
transfer to the Buyer all of the Intellectual Property Rights in accordance with
the transactions contemplated by this Agreement, without the requirement that
any consent to assignment or any payment.
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(b) The Company has taken such action to protect the Intellectual
Property Rights as is necessary for the Company to use such rights in its
business as currently conducted or currently contemplated without the payment of
royalties or penalties (except as set forth in the Disclosure Schedule). Without
limiting the generality of the foregoing, except as set forth in Section 2.17 of
the Disclosure Schedule, all employees, contract workers, consultants and other
agents of the Company have executed agreements sufficient to vest in the Company
ownership or the right to use the Intellectual Property Rights on which they
have performed services in the business of the Company as currently conducted
without the payment of royalties or penalties. Except as set forth in Section
2.17 of the Disclosure Schedule, the Company has not received any notice of, nor
are there any facts known to the Sellers which indicate a likelihood of, any
infringement or misappropriation by, or conflict from, any third party with
respect to the Intellectual Property Rights; no claim by any third party
contesting the validity of any Intellectual Property Rights has been made, is
currently outstanding or, to the knowledge of the Sellers, is threatened; the
Company has not received any notice of any infringement, misappropriation or
violation of any intellectual property rights of any third parties and, to the
knowledge of the Sellers, the Company has not infringed, misappropriated or
otherwise violated any such intellectual property rights; and, to the knowledge
of the Sellers, no infringement, illicit copying, misappropriation or violation
has occurred with respect to products currently being sold by the Company or
with respect to the products currently under development (in their present state
of development) or with respect to the conduct of the business of the Company as
now conducted.
2.18 LITIGATION. Except as set forth in the Disclosure Schedule under
the caption referencing this Section 2.18, there are no actions, suits,
proceedings, orders or investigations pending or, to the knowledge of the
Sellers, threatened against the Company, at law or in equity, or before or by
any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign.
2.19 WARRANTIES. The Disclosure Schedule summarizes under the caption
referencing this Section 2.19 all claims outstanding, pending or, to the
knowledge of the Sellers, threatened for breach of any warranty relating to any
products sold by the Company prior to the date hereof. The description of the
Company's product warranties set forth under the caption referencing this
Section 2.19 is correct and complete. The reserves for warranty claims on the
Latest Balance Sheet are consistent with the Company's prior practices and are
fully adequate to cover all warranty claims made or to be made against any
products of the Company sold prior to the date thereof.
2.20 EMPLOYEES. Except as set forth in Section 2.20 to the Disclosure
Schedule:
(a) to the knowledge of Sellers, no employee of the Company has any
plans to terminate his or her employment before or after the Closing Date;
(b) the Company is in material compliance with all laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security and
other taxes;
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(c) the Company has no material labor relations problem pending and its
labor relations are satisfactory;
(d) there are no workers' compensation claims pending against the
Company nor are the Sellers aware of any facts that would give rise to such a
claim;
(e) to the knowledge of the Sellers, no employee of the Company is
subject to any secrecy or noncompetition agreement or any other agreement or
restriction of any kind that would impede in any way the ability of such
employee to carry out fully all activities of such employee in furtherance of
the business of the Company; and
(f) no employee or former employee of the Company has any claim with
respect to any Intellectual Property Rights of the Company.
The Disclosure Schedule, under the caption referencing this Section 2.20, lists,
as of the date set forth in the Disclosure Schedule, each employee of the
Company and the position, title, remuneration (including any scheduled salary or
remuneration increases), date of employment and accrued vacation pay of each
such employee.
2.21 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth under the caption referencing Section 2.21 in
the Disclosure Schedule, with respect to all employees and former employees of
the Company and all dependents and beneficiaries of such employees and former
employees, (i) the Company does not maintain or contribute to any nonqualified
deferred compensation or retirement plans, contracts or arrangements; (ii) the
Company does not maintain or contribute to any qualified defined contribution
plans (as defined in Section 3(34) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or Section 414(i) of the Code; (iii) the
Company does not maintain or contribute to any qualified defined benefit plans
(as defined in Section 3(35) of ERISA or Section 414(j) of the Code); and (iv)
the Company does not maintain or contribute to any employee welfare benefit
plans (as defined in Section 3(1) of ERISA).
(b) To the extent required (either as a matter of law or to obtain the
intended tax treatment and tax benefits), all employee benefit plans (as defined
in Section 3(3) of ERISA) which the Company does maintain or to which it does
contribute (collectively, the "Plans") comply in all material respects with the
requirements of ERISA and the Code. With respect to the Plans, (i) all required
contributions which are due have been made, including all Company matching
contributions through the end of the month preceding the Closing Date, and a
proper accrual has been made for all contributions due prior to the Closing
Date; (ii) there are no actions, suits or claims pending, other than routine
uncontested claims for benefits; and (iii) there have been no nonexempt
prohibited transactions (as defined in Section 406 of ERISA or Section 4975 of
the Code).
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(c) Buyer has received true and complete copies of (i) the most recent
determination letter, if any, received by the Company from the Internal Revenue
Service regarding the Plans which the Company maintains or to which it
contributes and any amendment to any Plan made subsequent to any Plan amendments
covered by any such determination letter; (ii) the most recent financial
statements and annual report or return for the Plans; and (iii) the most
recently prepared actuarial valuation reports.
(d) The Company does not contribute (and has not ever contributed) to
any multi-employer plan, as defined in Section 3(37) of ERISA. The Company has
no actual or potential liabilities under Section 4201 of ERISA for any complete
or partial withdrawal from a multi-employer plan. The Company has no actual or
potential liability for death or medical benefits after separation from
employment, other than (i) death benefits under the employee benefit plans or
programs (whether or not subject to ERISA) set forth under the caption
referencing this Section 2.21 in the Disclosure Schedule and (ii) health care
continuation benefits described in Section 4980B of the Code.
(e) Neither the Company nor any of its directors, officers, employees
or other "fiduciaries", as such term is defined in Section 3(21) of ERISA, has
committed any breach of fiduciary responsibility imposed by ERISA or any other
applicable law with respect to the Plans which would subject the Company, Buyer,
Buyer's subsidiaries or any of their respective directors, officers or employees
to any liability under ERISA or any applicable law.
(f) The Company has not incurred any liability for any tax or civil
penalty or any disqualification of any employee benefit plan (as defined in
Section 3(3) of ERISA) imposed by Sections 4980B and 4975 of the Code and Part 6
of Title I and Section 502(i) of ERISA.
2.22 INSURANCE. The Disclosure Schedule, under the caption referencing
this Section 2.22, lists and briefly describes each insurance policy maintained
by the Company with respect to the Company's properties, assets and operations
and sets forth the date of expiration of each such insurance policy. All of such
insurance policies are in full force and effect and are issued by insurers of
recognized responsibility. The Company is not in default with respect to its
obligations under any of such insurance policies.
2.23 AFFILIATE TRANSACTIONS. Except as disclosed in the Disclosure
Schedule under the caption referencing this Section 2.23, and other than
pursuant to this Agreement, no officer or director of the Company or any member
of the immediate family of any such officer or director, or any entity in which
any of such persons owns any beneficial interest (other than any publicly-held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than one percent of the stock of which is
beneficially owned by any of such persons) (collectively "insiders"), has any
agreement with the Company (other than normal employment arrangements) or any
interest in any property, real, personal or mixed, tangible or intangible, used
in or pertaining to the business of the Company (other than ownership of capital
stock of the Company). None of the insiders has any direct or indirect interest
in any competitor, supplier or customer of the Company or in any person, firm or
entity from whom or to whom the
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Company leases any property, or in any other person, firm or entity with whom
the Company transacts business of any nature. For purposes of this Section 2.23,
the members of the immediate family of an officer or director shall consist of
the spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and
daughters-in-law, and brothers- and sisters-in-law of such officer or director.
Except as disclosed in the Disclosure Schedule under the caption referencing
this Section 2.23, the Sellers do not know of any agreement between the Company
and any employee or any member of the immediate family of any employee, or any
interest of an employee or such immediate family member in the property or
business of the Company, the termination of which, or the assertion of which,
would have a material adverse effect on the Company.
2.24 CUSTOMERS AND SUPPLIERS. The Disclosure Schedule, under the
caption referencing this Section 2.24, lists the 10 largest customers and
suppliers of the Company for the fiscal year ended October 31, 1999 and for the
ten-month period ended August 31, 2000 and sets forth opposite the name of each
such customer or supplier the approximate percentage of net sales or purchases
by the Company attributable to such customer or supplier for each such period.
Since the Balance Sheet Date, no customer or supplier listed on the Disclosure
Schedule under the caption referencing this Section 2.24 has indicated that it
will stop or decrease the rate of business done with the Company except for
changes in the ordinary course of the Company's business.
2.25 OFFICERS AND DIRECTORS; BANK ACCOUNTS. The Disclosure Schedule,
under the caption referencing this Section 2.25, lists all officers and
directors of the Company and all of the Company's bank accounts (designating
each authorized signer).
2.26 COMPLIANCE WITH LAWS; PERMITS.
(a) The Company and its officers, directors, agents and employees have
complied in all material respects with all applicable laws, regulations and
other requirements, including, but not limited to, federal, state, local and
foreign laws, ordinances, rules, regulations and other requirements pertaining
to product labeling, consumer products safety, equal employment opportunity,
employee retirement, affirmative action and other hiring practices, occupational
safety and health, workers' compensation, unemployment and building and zoning
codes, which materially affect the business of the Company or the Real Property
and to which the Company may be subject, and no claims have been filed against
the Company alleging a violation of any such laws, regulations or other
requirements. The Sellers have no knowledge of any action, pending or
threatened, to change the zoning for any of the Real Property. The Company is
not relying on any exemption from or deferral of any such applicable law,
regulation or other requirement that would not be available to Buyer after it
acquires the Company's properties, assets and business.
(b) The Company has in full force and effect, all material licenses,
permits and certificates, from federal, state, local and foreign authorities
(including, without limitation, federal and state agencies regulating
occupational health and safety) necessary to conduct its business and own and
operate its properties (other than Environmental Permits, as such term is
defined in Section 2.27(c) hereof) (collectively, the "Permits"). A true,
correct and complete list of all the
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Permits is set forth under the caption referencing this Section 2.26 in the
Disclosure Schedule. The Company has conducted its business in compliance with
all material terms and conditions of the Permits.
(c) The Company has not made or agreed to make gifts of money, other
property or similar benefits (other than incidental gifts of articles of nominal
value) to any actual or potential customer, supplier, governmental employee or
any other person in a position to assist or hinder the Company in connection
with any actual or proposed transaction.
(d) In particular, but without limiting the generality of the
foregoing, the Company is in compliance in all material respects with, and has
not received a notice or charge asserting any violation of or liability under,
the federal Occupational Safety and Health Act of 1970 or any other federal or
state acts (including rules and regulations thereunder) regulating or otherwise
affecting employee health and safety.
2.27 ENVIRONMENTAL MATTERS
(a) As used in this Section 2.27, the following terms shall have the
following meanings:
(i) "Hazardous Materials" means any dangerous, toxic or
hazardous pollutant, contaminant, chemical, waste, material or
substance as defined in or governed by any Environmental Law, including
without limitation any waste, material, substance, pollutant or
contaminant that might cause any injury to human health or safety or to
the environment or might subject the Company to any imposition of costs
or liability under any Environmental Law.
(ii) "Environmental Laws" means all applicable federal, state,
local and foreign laws, rules, regulations, codes and ordinances
relating to pollution, contamination or protection of the environment
(including, without limitation, all applicable federal, state, local
and foreign laws, rules, regulations, codes and ordinances relating to
Hazardous Materials in effect as of the date of this Agreement).
(iii) "Release" shall mean the spilling, leaking, disposing,
discharging, emitting, depositing, ejecting, leaching, escaping or any
other release or threatened release, however defined, whether
intentional or unintentional, of any Hazardous Material.
(b) The Company and the Real Property are in material compliance with
all applicable Environmental Laws.
(c) The Company has obtained, and maintained in full force and effect,
all material permits, licenses, certificates of compliance, approvals and other
authorizations necessary
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to conduct its business and own or operate the Real Property under applicable
Environmental Laws (collectively, the "Environmental Permits"). A copy of each
such Environmental Permit shall be provided by the Sellers to Buyer at least 14
days prior to the Closing. The Company has conducted its business in compliance
with all terms and conditions of the Environmental Permits. The Company has
filed all material reports and notifications required to be filed under and
pursuant to all applicable Environmental Laws.
(d) Except as set forth in the Disclosure Schedule under the caption
referencing this Section 2.27: (i) no Hazardous Materials have been generated,
treated, contained, handled, located, used, manufactured, processed, or stored
on or under any part of the Real Property by the Company, except in the ordinary
course of business and in material compliance with all Environmental Laws, (ii)
to the knowledge of the Sellers, no Hazardous Materials have been buried,
incinerated, deposited or released on or under the Real Property by the Company
or any prior occupant of the Real Property, and (iii) to the knowledge of the
Sellers, no aboveground or underground storage tanks are located on, under or
about the Real Property, or have been located on, under or about the Real
Property and then subsequently been removed or filled.
(e) Except as set forth in the Disclosure Schedule under the caption
referencing this Section 2.27, the Company has not received notice alleging in
any manner that the Company is, or might be potentially responsible for any
Release of Hazardous Materials, or any costs arising under or violation of
Environmental Laws.
(f) Except for expenditures that are consistent with past practices, no
expenditure will be required in order for Buyer to comply with any Environmental
Laws in effect at the time of the Closing in connection with the operation or
continued operation of the business of the Company or the Real Property in a
manner consistent with the current operation thereof by the Company.
(g) To the knowledge of the Company and the Sellers, the Real Property
has not been listed on the United States Environmental Protection Agency
National Priorities List of Hazardous Waste Sites, or any other similar list,
schedule, law, inventory or record of hazardous or solid waste sites maintained
by any federal, state or local agency.
(h) Sellers, on behalf of themselves and its successors and assigns,
hereby waive, release and agree not to bring any claim, demand, cause of action
or proceeding, including without limitation any cost recovery action, against
Buyer under any Environmental Law related to the operation of the Company or the
Real Property prior to the Closing Date.
2.28 BROKERAGE. No third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for financial advisory services or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of Sellers
or the Company other than the fees and expenses of Emerge Corporation, which
fees and expenses will be paid by Sellers.
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2.29 DISCLOSURE. Neither this Agreement nor any of the Exhibits hereto
nor any of the documents delivered by or on behalf of Sellers or the Company
pursuant to Article VI hereof nor the Disclosure Schedule nor any of the
financial statements referred to in Section 2.08 hereof, taken as a whole,
contain any untrue statement of a material fact regarding the Company or its
business or any of the other matters dealt with in this Article II relating to
the Company or the transactions contemplated by this Agreement. There is no fact
which has not been disclosed to Buyer of which the Sellers are aware which
materially affects adversely or could reasonably be anticipated to materially
affect adversely the business, including operating results, assets, customer
relations, employee relations and business prospects, of the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Sellers that:
3.01 INCORPORATION AND CORPORATE POWER. Buyer is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Minnesota, with the requisite corporate power and authority to enter into
this Agreement and perform its obligations hereunder.
3.02 EXECUTION, DELIVERY; VALID AND BINDING AGREEMENT. The execution,
delivery and performance of this Agreement by Buyer and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
requisite corporate action, and no other corporate proceedings on its part are
necessary to authorize the execution, delivery or performance of this Agreement.
This Agreement has been duly executed and delivered by Buyer and constitutes the
valid and binding obligation of Buyer, enforceable in accordance with its terms.
3.03 NO BREACH. The execution, delivery and performance of this
Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby do not conflict with or result in any breach of any of the
provisions of, constitute a default under, result in a violation of, result in
the creation of a right of termination or acceleration or any lien, security
interest, charge or encumbrance upon any assets of Buyer, or require any
authorization, consent, approval, exemption or other action by or notice to any
court or other governmental body, under the provisions of the Articles of
Incorporation or Bylaws of Buyer or any indenture, mortgage, lease, loan
agreement or other agreement or instrument by which Buyer is bound or affected,
or any law, statute, rule or regulation or order, judgment or decree to which
Buyer is subject.
3.04 GOVERNMENTAL AUTHORITIES; CONSENTS. Buyer is not required to
submit any notice, report or other filing with any governmental authority in
connection with the execution or delivery by it of this Agreement or the
consummation of the transactions contemplated hereby. No consent, approval or
authorization of any governmental or regulatory
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authority or any other party or person is required to be obtained by Buyer in
connection with its execution, delivery and performance of this Agreement or the
transactions contemplated hereby.
3.05 BROKERAGE. No third party shall be entitled to receive any
brokerage commissions, finder's fees, fees for financial advisory services or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement or agreement made by or on behalf of Buyer.
3.06 INVESTMENT INTENT. Buyer is purchasing the Shares for its own
account with the present intention of holding the Shares for investment purposes
and not with a view to or for sale in connection with any distribution of the
Shares in violation of any applicable securities law. Buyer will refrain from
transferring or otherwise disposing of any of the Shares, or any interest
therein, in such manner as to cause Sellers to be in violation of the
registration requirements of the Securities Act of 1933, as amended, or
applicable state securities or blue sky laws.
ARTICLE IV
COVENANTS OF SELLERS
4.01 CONDUCT OF THE BUSINESS. Sellers agree to cause the Company to
observe each term set forth in this Section 4.01 and agree that, from the date
hereof until the Closing Date, unless otherwise consented to by Buyer in
writing:
(a) The business of the Company shall be conducted only in, and the
Company shall take no action except in, the ordinary course of the Company's
business, on an arm's-length basis and in accordance in all material respects
with all applicable laws, rules and regulations and the Company's past custom
and practice;
(b) The Company shall not, directly or indirectly, do or permit to
occur any of the following:
(i) except pursuant to the exercise of options, issue or sell
any additional shares of, or any options, warrants, conversion
privileges or rights of any kind to acquire any shares of, any of its
capital stock;
(ii) sell, pledge, dispose of or encumber any of its assets,
except in the ordinary course of business;
(iii) amend or propose to amend its Articles of Incorporation
or Bylaws;
(iv) split, combine or reclassify any outstanding shares of
Common Stock, or declare, set aside or pay any dividend or other
distribution payable in cash, stock, property or otherwise with respect
to shares of Common Stock;
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(v) redeem, purchase or acquire or offer to acquire any shares
of Common Stock or other securities of the Company;
(vi) acquire (by merger, exchange, consolidation, acquisition
of stock or assets or otherwise) any corporation, partnership, joint
venture or other business organization or division or material assets
thereof;
(vii) incur any indebtedness for borrowed money or issue any
debt securities except the borrowing of working capital in the ordinary
course of business and consistent with past practice;
(viii) permit any accounts payable owed to trade creditors to
remain outstanding more than 60 days;
(ix) accelerate, beyond the normal collection cycle,
collection of accounts receivable; or
(x) enter into or propose to enter into, or modify or propose
to modify, any agreement, arrangement or understanding with respect to
any of the matters set forth in this Section 4.01(b);
(c) The Company shall not, directly or indirectly, (i) enter into or
modify any employment, severance or similar agreements or arrangements with, or
grant any bonuses, salary increases, severance or termination pay to, any
officers or directors or consultants; or (ii) take any action with respect to
the grant of any bonuses, salary increases, severance or termination pay or with
respect to any increase of benefits payable in effect on the date hereof;
(d) The Company shall not adopt or amend any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, trust, fund or group arrangement for
the benefit or welfare of any employees or any bonus, profit sharing,
compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or
arrangements for the benefit or welfare of any director;
(e) The Company shall not cancel or terminate its current insurance
policies or cause any of the coverage thereunder to lapse, unless simultaneously
with such termination, cancellation or lapse, replacement policies providing
coverage equal to or greater than the coverage under the canceled, terminated or
lapsed policies for substantially similar premiums are in full force and effect;
(f) Each of the Sellers and the Company shall (i) use its reasonable
best efforts to preserve intact the Company's business organization and
goodwill, keep available the services of the Company's officers and employees as
a group and maintain satisfactory relationships with suppliers, distributors,
customers and others having business relationships with the Company;
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(ii) confer on a regular and frequent basis with representatives of Buyer to
report operational matters and the general status of ongoing operations; (iii)
not intentionally take any action which would render, or which reasonably may be
expected to render, any representation or warranty made by it in this Agreement
untrue at the Closing; (iv) notify Buyer of any emergency or other change in the
normal course of the Company's business or in the operation of the Company's
properties and of any governmental or third party complaints, investigations or
hearings (or communications indicating that the same may be contemplated) if
such emergency, change, complaint, investigation or hearing would be material,
individually or in the aggregate, to the business, operations or financial
condition of the Company or to the Company's or Sellers' ability to consummate
the transactions contemplated by this Agreement; and (v) promptly notify Buyer
in writing if any Seller or the Company shall discover that any representation
or warranty made by it in this Agreement was when made, or has subsequently
become, untrue in any respect;
(g) The Company shall (i) file any Tax returns, elections or
information statements with respect to any liabilities for Taxes of the Company
or other matters relating to Taxes of the Company which pursuant to applicable
law must be filed prior to the Closing Date; (ii) promptly upon filing provide
copies of any such Tax returns, elections or information statements to Buyer;
(iii) make any such Tax elections or other discretionary positions with respect
to Taxes taken by or affecting the Company only upon prior consultation with and
consent of Buyer; and (iv) not amend any Return; and
(h) The Company shall not perform any act referenced by (or omit to
perform any act which omission is referenced by) the terms of Section 2.11.
4.02 ACCESS TO BOOKS AND RECORDS. Between the date hereof and the
Closing Date, the Sellers shall cause the Company to afford to Buyer and its
authorized representatives (the "Buyer's Representatives") full access at all
reasonable times and upon reasonable notice to the offices, properties, books,
records, officers, employees and other items of the Company, and the work papers
of KPMG, the Company's independent accountants, relating to work done by KPMG
with respect to the Company for each of the fiscal years ended October 31, 1999
and 1998, and otherwise provide such assistance as is reasonably requested by
Buyer in order that Buyer may have a full opportunity to make such investigation
and evaluation as it shall reasonably desire to make of the business and affairs
of the Company. In addition, the Sellers shall cause the Company and its
officers and directors to cooperate fully (including providing introductions
where necessary) with Buyer to enable Buyer to contact such third parties,
including customers, prospective customers, specifying agencies, vendors or
suppliers of the Company, as Buyer deems reasonably necessary to complete its
due diligence; provided that Buyer agrees not to initiate such contacts without
the prior approval of the Company, which approval will not be unreasonably
withheld. Notwithstanding any other provisions of this Agreement, however,
Sellers and the Company shall not be required to disclose to Buyer any
information that is not publicly available regarding the New Company Products,
and to the extent Sellers and the Company do disclose such information, Sellers
and the Company acknowledge that Buyer shall not be under any obligation of
confidentiality with respect thereto, or be prohibited from using, the
information provided, regardless of any course of dealing between the parties.
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4.03 REGULATORY FILINGS. As promptly as practicable after the execution
of this Agreement, the Sellers shall, and shall cause the Company to, make or
cause to be made all filings and submissions under any laws or regulations
applicable to the Company for the consummation of the transactions contemplated
herein. Sellers will coordinate and cooperate with Buyer in exchanging such
information, will not make any such filing without providing to Buyer a final
copy thereof for its review and consent at least two full business days in
advance of the proposed filing and will provide such reasonable assistance as
Buyer may request in connection with all of the foregoing.
4.04 CONDITIONS. Sellers shall take all commercially reasonable actions
necessary or desirable to cause the conditions set forth in Section 6.01 to be
satisfied and to consummate the transactions contemplated herein as soon as
reasonably possible after the satisfaction thereof (but in any event within
three business days of such date).
4.05 NO NEGOTIATIONS, ETC. Sellers shall not, and shall cause the
Company not to, directly or indirectly, through any officer, director, agent or
otherwise, solicit, initiate or encourage submission of any proposal or offer
from any person or entity (including any of its or their officers or employees)
relating to any liquidation, dissolution, recapitalization, merger,
consolidation or acquisition or purchase of all or a material portion of the
assets of, or any equity interest in, the Company or other similar transaction
or business combination involving the Company, or participate in any
negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person or entity to
do or seek any of the foregoing. Sellers shall, and shall cause the Company to,
promptly notify Buyer if any such proposal or offer, or any inquiry from or
contact with any person with respect thereto, is made and shall promptly provide
Buyer with such information regarding such proposal, offer, inquiry or contact
as Buyer may request.
4.06 SELLERS' EXPENSES. Sellers shall specifically instruct Emerge
Corporation, Stoel Rives LLP, and any accounting firm or other organization that
has furnished services to the Sellers or the Company in connection with the
transactions contemplated by this Agreement, that any fees and expenses of such
firms in excess of the Sellers' Expenses described in Section 1.06, which shall
be paid by Buyer on behalf of Sellers as described in that section, shall be the
liability of the Sellers, and shall obtain the agreement of such firms that, if
the sale contemplated by this Agreement is completed, and the Buyer pays the
Sellers' Expenses as provided in Section 1.06, the Company shall have no further
obligation to pay any of such fees.
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ARTICLE V
COVENANTS OF BUYER
Buyer covenants and agrees with Sellers as follows:
5.01 REGULATORY FILINGS. As promptly as practicable after the execution
of the Agreement, Buyer shall make or cause to be made all filings and
submissions under any laws or regulations applicable to Buyer for the
consummation of the transactions contemplated herein. Buyer will coordinate and
cooperate with Sellers in exchanging such information, will not make any such
filing without providing to Sellers a final copy thereof for their review and
consent at least two full business days in advance of the proposed filing and
will provide such reasonable assistance as Sellers and the Company may request
in connection with all of the foregoing.
5.02 CONDITIONS. Buyer shall take all commercially reasonable actions
necessary or desirable to cause the conditions set forth in Section 6.02 to be
satisfied and to consummate the transactions contemplated herein as soon as
reasonably possible after the satisfaction thereof (but in any event within
three business days of such date).
ARTICLE VI
CONDITIONS TO CLOSING
6.01 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer to
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) The representations and warranties set forth in Article II hereof
shall be true and correct in all material respects at and as of the Closing Date
as though then made and as though the Closing Date had been substituted for the
date of this Agreement throughout such representations and warranties (without
taking into account any disclosures by Sellers or the Company of discoveries,
events or occurrences arising on or after the date hereof), except that any such
representation or warranty made as of a specified date (other than the date
hereof) shall only need to have been true on and as of such date;
(b) Sellers shall have performed in all material respects all of the
covenants and agreements required to be performed and complied with by them
under this Agreement prior to the Closing;
(c) Sellers shall have obtained, or caused to be obtained, each consent
and approval necessary in order that the transactions contemplated herein not
constitute a breach or violation of, or result in a right of termination or
acceleration of, or creation of any encumbrance on any of the Company's assets
pursuant to the provisions of, any agreement, arrangement or
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undertaking of or affecting the Company or Sellers or any license, franchise or
permit of or affecting the Company or Sellers;
(d) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii) seeking to prohibit direct or indirect
ownership or operation by Buyer of all or a material portion of the business or
assets of the Company and its subsidiaries, or to compel Buyer or any of its
subsidiaries or the Company to dispose of or to hold separately all or a
material portion of the business or assets of Buyer and its subsidiaries or of
the Company, as a result of the transactions contemplated hereby, (iii) seeking
to require direct or indirect transfer or sale by Buyer of any of the Shares,
(iv) seeking to invalidate or render unenforceable any material provision of
this Agreement or any of the Related Agreements, or (v) otherwise relating to
and materially adversely affecting the transactions contemplated hereby;
(e) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated hereby
by any federal, state or foreign court, government or governmental authority or
agency, which would reasonably be expected to result, directly or indirectly, in
any of the consequences referred to in Section 6.01(d) hereof;
(f) Buyer shall not have discovered any fact or circumstance existing
as of the date of this Agreement which has not been disclosed to Buyer as of the
date of this Agreement regarding the business, assets, properties, condition
(financial or otherwise), results of operations or prospects of the Company
which is, individually or in the aggregate with other such facts and
circumstances, materially adverse to the Company or to the value of the Shares;
(g) There shall have been no damage, destruction or loss of or to any
property or properties owned or used by the Company, whether or not covered by
insurance, which, in the aggregate, has, or would be reasonably likely to have,
a material adverse effect on the Company;
(h) Buyer shall have received from counsel for the Company a written
opinion, dated as of the Closing Date, addressed to Buyer and satisfactory to
Buyer's counsel, in form and substance substantially as set forth in Exhibit D;
(i) The Company shall have cancelled that certain U.S. Simply Business
Premium Line Agreement with U.S. Bank and related Commercial Security Agreement
and Commercial Guaranty and obtained a full release of any security interest of
U.S. Bank in the assets of the Company;
(j) On the Closing Date, Sellers shall have delivered to Buyer all of
the following:
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(i) certificates of the officers of the Company or other
persons satisfactory to Buyer substantially in the form set forth in
Exhibit E attached hereto, dated the Closing Date, stating that the
conditions precedent set forth in subsections (a) and (b) above have
been satisfied;
(ii) copies of the third party and governmental consents and
approvals referred to in subsection (c) above;
(iii) the option agreements issued to Sellers and the
NonSeller OptionHolders representing all the Options, with agreement of
sale and cancellation substantially in the form of the attached Exhibit
F;
(iv) the stock certificates issued to Sellers representing the
Shares, duly endorsed for transfer or accompanied by a duly executed
stock power, with requisite stock transfer stamps, if any, attached;
(v) the Company's minute books, stock transfer records,
corporate seal and other materials related to the Company's corporate
administration;
(vi) resignations (effective as of the Closing Date) from such
of the Company's officers and members of the Company's Board of
Directors as Buyer shall have requested prior to the Closing Date;
(vii) a copy of the Articles of Incorporation of the Company,
certified by the Secretary of State of the State of Oregon;
(viii) a copy of the bylaws of the Company; along with
certificates executed on behalf of the Company by its corporate
secretary certifying to Buyer that such copies are true, correct and
complete copies of such bylaws and that such bylaws were duly adopted
and have not been amended or rescinded;
(ix) an executed copy of each of the Related Agreements;
(x) the Expense Certificate; and
(xi) such other certificates, documents and instruments as
Buyer reasonably requests related to the transactions contemplated
hereby.
(k) Each of the Principal Employees (as defined in Section 8.03) shall
have accepted employment with Buyer, through the Company, on terms reasonably
acceptable to Buyer.
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6.02 CONDITIONS TO SELLERS' OBLIGATIONS. The obligations of Sellers to
consummate the transactions contemplated by this Agreement are subject to the
satisfaction of the following conditions on or before the Closing Date:
(a) The representations and warranties set forth in Article III hereof
will be true and correct in all material respects at and as of the Closing as
though then made and as though the Closing Date had been substituted for the
date of this Agreement throughout such representations and warranties;
(b) Buyer shall have performed in all material respects all the
covenants and agreements required to be performed by it under this Agreement
prior to the Closing;
(c) All material governmental filings, authorizations and approvals
that are required for the consummation of the transactions contemplated hereby
will have been duly made and obtained;
(d) There shall not be threatened, instituted or pending any action or
proceeding, before any court or governmental authority or agency, domestic or
foreign, (i) challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly restrain or prohibit, the consummation of the
transactions contemplated hereby or seeking to obtain material damages in
connection with such transactions, (ii) seeking to invalidate or render
unenforceable any material provision of this Agreement or any of the Related
Agreements, or (iii) otherwise relating to and materially adversely affecting
the transactions contemplated hereby;
(e) There shall not be any action taken, or any statute, rule,
regulation, judgment, order or injunction, enacted, entered, enforced,
promulgated, issued or deemed applicable to the transactions contemplated hereby
by any federal, state or foreign court, government or governmental authority or
agency, which would reasonably be expected to result, directly or indirectly, in
any of the consequences referred to in Section 6.02(d) hereof;
(f) On the Closing Date, Buyer will have delivered to Sellers (i) a
certificate of appropriate officer(s) of Buyer substantially in the form set
forth as Exhibit G attached hereto, dated the Closing Date, stating that the
conditions precedent set forth in subsections (a), (b) and (c) above have been
satisfied, (ii) an executed copy of each of the Related Agreements, (iii) a copy
of each of (X) the text of the resolutions adopted by the board of directors of
Buyer authorizing the execution, delivery and performance of this Agreement and
the consummation of all of the transactions contemplated by this Agreement and
(Y) the bylaws of Buyer, along with certificates executed on behalf of Buyer by
its corporate secretary certifying to Sellers that such copies are true, correct
and complete copies of such resolutions and bylaws, respectively, and that such
resolutions and bylaws were duly adopted and have not been amended or rescinded,
and (iv) incumbency certificates executed on behalf of Buyer by its corporate
secretary certifying the signature and office of each officer executing this
Agreement or any of the Related Agreements.
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ARTICLE VII
TERMINATION
7.01 TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual consent of Buyer and the Sellers' Representative;
(b) by either Buyer or the Sellers' Representative if there has been a
material misrepresentation, breach of warranty or breach of covenant on the part
of any or the Sellers or the Buyer, respectively, in the representations,
warranties and covenants set forth in this Agreement; or
(c) by either Buyer or the Sellers' Representative on behalf of the
Sellers if the transactions contemplated hereby have not been consummated by
December 31, 2000; provided that, neither Buyer nor the Sellers' Representative
will be entitled to terminate this Agreement pursuant to this Section 8.01(c) if
such party's willful breach of this Agreement has prevented the consummation of
the transactions contemplated hereby.
7.02 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either Buyer or Sellers' Representative as provided in Section
7.01, this Agreement shall become void and there shall be no liability on the
part of either Buyer or Sellers, or their respective stockholders, officers, or
directors, except that Sections 10.01, 11.01 and 11.02 hereof shall survive
indefinitely, and except with respect to willful breaches of this Agreement
prior to the time of such termination.
ARTICLE VIII
ADDITIONAL AGREEMENTS
8.01 NONCOMPETITION AGREEMENTS. Each of the Shareholders shall execute,
as a condition to the Closing, a Non-Competition Agreement in the form of the
attached Exhibit H (the "Seller Noncompete Agreement").
8.02 EMPLOYMENT AGREEMENT. George Fabel, PhD, President of the Company,
shall execute an employment agreement with the Company substantially in the form
of Exhibit I (the "Employment Agreement").
8.03 EMPLOYEE CONFIDENTIALITY AND NONCOMPETITION AGREEMENTS. Each of
Richard DeHoff, PhD., Vice President Engineering; Evelyn Brosnan, Vice President
Marketing; Geary Lewis, Vice President Sales; and Peter Brown (together with
George Fabel, the "Principal Employees") shall execute, as a condition to
Closing, an employee confidentiality and noncompete agreement with the Buyer in
the form attached hereto as Exhibit J (the
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"Employee Agreement" and together with the Employment Agreement and the Seller
Noncompete Agreements, the "Related Agreements").
ARTICLE IX
SURVIVAL; INDEMNIFICATION
9.01 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Notwithstanding any
investigation made by or on behalf of any of the parties hereto or the results
of any such investigation and notwithstanding the participation of such party in
the Closing, the representations and warranties contained in Article II and
Article III hereof shall survive the Closing for a period of eighteen months
following the Closing Date; provided that the representations set forth in
Sections 2.05, 2.15 and 2.21 shall survive closing and until expiration the
applicable statute of limitations (such date of expiration at eighteen months,
or at expiration of the statute of limitations, as the case may be, being
referred to as the "Expiration Date").
9.02 INDEMNIFICATION BY SELLERS. (a) Subject to the limitations of
Sections 9.02(b) and 9.02(c), each of the Sellers agree to indemnify in full
Buyer and its officers, directors, employees, agents and stockholders
(collectively, the "Buyer Indemnified Parties") and hold them harmless against
any loss, liability, deficiency, damage, expense or cost (including reasonable
legal expenses), whether or not actually incurred or paid prior to the
Expiration Date (collectively, "Losses"), which Buyer Indemnified Parties may
suffer, sustain or become subject to, as a result of (i) any misrepresentation
in any of the representations and warranties of any Seller contained in this
Agreement or in any exhibits, schedules, certificates or other documents
delivered or to be delivered by or on behalf of any Seller pursuant to the terms
of this Agreement (such agreements, certificates or other documents, but
excluding the Related Documents, being collectively referred to as the "Related
Documents"), (ii) any breach of, or failure to perform, any agreement of any
Seller contained in this Agreement or any of the Related Documents, (iii) any
"Claims" (as defined in Section 9.04(a) hereof) or threatened Claims against
Buyer arising out of the actions or inactions of any Seller or the Company with
respect to the Company's business or the Real Property prior to the Closing, or
(iv) any expenses of the Sellers or the Company relating to the transactions
contemplated by this Agreement, (including attorneys' and accountants' fees (and
the expenses of the Company for attorneys, accountants and Emerge Corporation))
other than the Sellers' Expenses (the Losses enumerated in (i)-(iv) above being
collectively referred to as "Buyer Losses").
(b) Sellers shall be liable to the Buyer Indemnified Parties for any
Buyer Losses (i) only if Buyer or another Buyer Indemnified Party delivers to
the Sellers' Representative written notice, setting forth in reasonable detail
the identity, nature and amount of Buyer Losses related to such claim or claims
prior to the Expiration Date, (ii) only if the aggregate amount of all Buyer
Losses exceeds $50,000 (the "Basket Amount"), in which case Sellers shall be
obligated to indemnify the Buyer Indemnified Parties for the aggregate amount of
all such Buyer Losses, including the Basket Amount, and (iii) only to the extent
the aggregate Losses for which
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indemnity has been paid does not exceed the Total Consideration (the "Cap");
provided, however, that neither the Basket Amount nor the provisions of Section
9.02(c) below shall apply to any indemnification pursuant to Section
9.02(a)(iv). The Buyer Indemnified Party's failure to provide the detail
required by clause (i) in the preceding sentence shall not constitute either a
breach of this Agreement by the Buyer Indemnified Party or any basis for Sellers
to assert that the Buyer Indemnified Party did not comply with the terms of this
Section 9.02 sufficient to cause the Buyer Indemnified Party to have waived its
rights under this Section 9.02.
(c) No Seller shall be liable to a Buyer Indemnified Party for an
amount in excess of the portion of the Total Consideration received or to be
received by such Seller in the sale transaction pursuant to this Agreement. In
the event that any Buyer Loss exceeds the portion of the Total Consideration
actually received by a Seller prior to payment of all of the Earn-Out, such
Buyer Loss shall continue to constitute a claim against, and subject to the
provisions of this Article IX and Section 1.03(f) may be offset against, any
future payments pursuant to such Earn-Out. In accordance with Section 9.05, each
Seller agrees to be finally bound by any agreement made by the Sellers'
Representative with respect to any claim to indemnity, including any Claim, by a
Buyer Indemnified Party pursuant to Section 9.04. Each Seller agrees to
contribute to any Buyer Loss (including the costs of the Sellers' Representative
in negotiating, litigating, settling or otherwise dealing with any claim for
indemnification, including fees and expenses of counsel) for which the Sellers'
Representative has determined or agreed that the Buyer is entitled to
indemnification hereunder in proportion to the ratio to which the Total
Consideration received by such Seller bears to the Total Consideration received
by all Sellers. No Seller shall be obligated to contribute to any such Buyer
Loss in excess of such proportion and Buyer shall have no claim against a Seller
for any amount in excess of such proportion.
9.03 INDEMNIFICATION BY BUYER.
(a) Subject to the limitations of Section 9.03(b), Buyer agrees to
indemnify in full the Sellers, and their respective officers, directors,
employees, agents and stockholders (collectively, the "Seller Indemnified
Parties") and hold them harmless against any Losses which any of the Seller
Indemnified Parties may suffer, sustain or become subject to as a result of (i)
any misrepresentation in any of the representations and warranties of Buyer
contained in this Agreement or in any of the Related Documents, (ii) any breach
of, or failure to perform, any agreement of Buyer contained in this Agreement or
any of the Related Documents, or (iii) any Claims or threatened Claims against
Sellers arising out of the actions or inactions of Buyer with respect to the
Company's business or the Real Property after the Closing (collectively, "Seller
Losses").
(b) Buyer shall be liable to the Seller Indemnified Parties for any
Seller Losses (i) only if the Sellers' Representative or another Seller
Indemnified Party delivers to the Buyer written notice, setting forth in
reasonable detail the identity, nature and amount of Seller Losses related to
such claim or claims prior to eighteen months after the Closing Date, (ii) only
if the aggregate amount of all Losses exceeds the Basket Amount, in which case
Buyer shall be
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obligated to indemnify the Seller Indemnified Parties for the aggregate amount
of all such Losses, including the Basket Amount, and (iii) only to the extent
such Losses do not exceed the Cap. The Seller Indemnified Party's failure to
provide the detail required by clause (i) in the preceding sentence shall not
constitute either a breach of this Agreement by the Seller Indemnified Party or
any basis for Buyer to assert that the Seller Indemnified Party did not comply
with the terms of this Section 9.03 sufficient to cause the Seller Indemnified
Party to have waived its rights under this Section 9.03.
9.04 METHOD OF ASSERTING CLAIMS. As used herein, an "Indemnified Party"
shall refer to a "Buyer Indemnified Party" or "Seller Indemnified Party," as
applicable, the "Notifying Party" shall refer to the party hereto whose
Indemnified Parties are entitled to indemnification hereunder, and the
"Indemnifying Party" shall refer to the party hereto obligated to indemnify such
Notifying Party's Indemnified Parties.
(a) In the event that any of the Indemnified Parties is made a
defendant in or party to any action or proceeding, judicial or administrative,
instituted by any third party for the liability or the costs or expenses of
which are Losses (any such third party action or proceeding being referred to as
a "Claim"), the Notifying Party shall give the Indemnifying Party prompt notice
thereof. The failure to give such notice shall not affect any Indemnified
Party's ability to seek reimbursement unless such failure has materially and
adversely affected the Indemnifying Party's ability to defend successfully a
Claim. The Indemnifying Party shall be entitled to contest and defend such
Claim; provided, that the Indemnifying Party (i) has a reasonable basis for
concluding that such defense may be successful and (ii) diligently contests and
defends such Claim. Notice of the intention so to contest and defend shall be
given by the Indemnifying Party to the Notifying Party within 20 business days
after the Notifying Party's notice of such Claim (but, in all events, at least
five business days prior to the date that an answer to such Claim is due to be
filed). Such contest and defense shall be conducted by reputable attorneys
employed by the Indemnifying Party. The Notifying Party shall be entitled at any
time, at its own cost and expense (which expense shall not constitute a Loss
unless the Notifying Party reasonably determines that the Indemnifying Party is
not adequately representing or, because of a conflict of interest, may not
adequately represent, any interests of the Indemnified Parties, and only to the
extent that such expenses are reasonable), to participate in such contest and
defense and to be represented by attorneys of its or their own choosing. If the
Notifying Party elects to participate in such defense, the Notifying Party will
cooperate with the Indemnifying Party in the conduct of such defense. Neither
the Notifying Party nor the Indemnifying Party may concede, settle or compromise
any Claim without the consent of the other party, which consents will not be
unreasonably withheld. Notwithstanding the foregoing, (i) if a Claim seeks
equitable relief or (ii) if the subject matter of a Claim relates to the ongoing
business of any of the Indemnified Parties, which Claim, if decided against any
of the Indemnified Parties, would materially adversely affect the ongoing
business or reputation of any of the Indemnified Parties, then, in each such
case, the Indemnified Parties alone shall be entitled to contest, defend and
settle such Claim in the first instance and, if the Indemnified Parties do not
contest, defend or settle such Claim, the Indemnifying Party shall then have the
right to contest and defend (but not settle) such Claim.
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(b) In the event any Indemnified Party should have a claim against any
Indemnifying Party that does not involve a Claim, the Notifying Party shall
deliver a notice of such claim with reasonable promptness to the Indemnifying
Party. If the Indemnifying Party notifies the Notifying Party that it does not
dispute the claim described in such notice or fails to notify the Notifying
Party within 30 days after delivery of such notice by the Notifying Party
whether the Indemnifying Party disputes the claim described in such notice, the
Loss in the amount specified in the Notifying Party's notice will be
conclusively deemed a liability of the Indemnifying Party and the Indemnifying
Party shall pay the amount of such Loss to the Indemnified Party on demand. If
the Indemnifying Party has timely disputed its Liability with respect to such
claim, the Chief Executive Officer, or Sellers' Representative, as the case may
be, of the Indemnifying Party and the Notifying Party will proceed in good faith
to negotiate a resolution of such dispute, and if not resolved through the
negotiations of such Chief Executive Officer and Sellers' Representative within
60 days after the delivery of the Notifying Party's notice of such claim, such
dispute shall be resolved fully and finally in Minneapolis, Minnesota by an
arbitrator selected pursuant to, and an arbitration governed by, the Commercial
Arbitration Rules of the American Arbitration Association. The arbitrator shall
resolve the dispute within 30 days after selection and judgment upon the award
rendered by such arbitrator may be entered in any court of competent
jurisdiction.
(c) After the Closing, the rights set forth in this Article IX shall be
each party's sole and exclusive remedies against the other party hereto for
misrepresentations or breaches of covenants contained in this Agreement and the
Related Documents. Notwithstanding the foregoing, nothing herein shall prevent
any of the Indemnified Parties from bringing an action based upon allegations of
fraud or other intentional breach of an obligation of or with respect to either
party in connection with this Agreement and the Related Documents. In the event
such action is brought, the prevailing party's attorneys' fees and costs shall
be paid by the nonprevailing party.
(d) Any indemnification payable under this Article IX shall be, to the
extent permitted by law, an adjustment to purchase price.
9.05 SELLERS' REPRESENTATIVE; POWER OF ATTORNEY
(a) Each of the Sellers hereby appoints Peter S. Brown (the "Sellers'
Representative") as agent and attorney-in-fact for each Seller, for and on
behalf of each such Seller to give and receive notices and communications under
this Agreement, to accept or reject the Closing Date Statement or any Earn-Out
Statement in accordance with Section 1.04, to pay any withholding taxes required
to be withheld on payments received under Article I, to execute the Escrow
Agreement on behalf of each of the Sellers and to deposit into the Escrow Fund
the portion of the Total Consideration set forth opposite their names on the
attached Exhibit A, to authorize delivery to any Indemnified Person of proceeds
from the Escrow Fund in satisfaction of claims by an Indemnified Person, to
receive notices of any Claim from a Buyer Indemnified Party pursuant to Section
9.04(a) or any claim pursuant to Section 9.04(b), to agree to or reject any such
Claim or claim, or to settle or arbitrate the same, to object to such
deliveries, to agree to,
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negotiate, enter into settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with respect to such
claims, and to take all actions necessary or appropriate in the judgment of the
Sellers' Representative for the accomplishment of the foregoing. Without
limiting the generality of the foregoing, the Sellers' Representative shall have
the right to sue in the name of the Sellers, to be sued as the representative of
the Sellers and to finally settle any dispute to which the Sellers may be party
under this Agreement. Each of the Sellers agrees to contribute to the cost to
the Sellers' Representative of any such actions (including the fees and expenses
of counsel, and other advisors), including contributions requested in advance of
any such litigation, arbitration or settlement. In addition to the contractual
liability to the Sellers' Representative and Buyer, the Sellers' Representative
may offset any failure to pay such costs or expenses against any further amounts
due any Seller who fails or refuses to contribute such Sellers' pro rata portion
to such costs and expenses and the Buyer agrees to honor such offset.
(b) Notices or communications to or from the Sellers' Representative
shall constitute notice to or from each of the Sellers and actions of the
Sellers' Representative relating to this Agreement, or disputes hereunder, shall
be considered actions of, and be binding upon, each of the Sellers. A decision,
act, consent or instruction of the Sellers' Representative with respect to the
matters contemplated by this Section 9.05 (including such actions relating to
indemnification in accordance with Section 9.04)) shall constitute a decision of
all the Sellers and shall be final, binding and conclusive upon each of such
Sellers, and the Escrow Agent and Buyer may rely upon any such decision, act,
consent or instruction of the Sellers' Representative as being the decision,
act, consent or instruction of each Seller. The Escrow Agent and Buyer are
hereby relieved from any liability to any Person for any acts done by them in
accordance with such decision, act, consent or instruction of the Sellers'
Representative. Without limiting the generality of the foregoing, any action in
negotiation, settlement or other resolution of any Claim under Section 9.04(a),
or claim for indemnity under Section 9.04(b), taken by the Sellers'
Representative shall be final and binding on each of the Sellers. Each of the
Sellers hereby waives, as against the Buyer or the Buyer Indemnified Parties,
any defense with respect to any such action taken by the Sellers'
Representative.
(c) The Sellers' Representative may resign upon written notice to
Buyer, the Sellers and Escrow Agent. The Sellers' Representative may be changed
or replaced by the Sellers from time to time upon not less than thirty (30)
days' prior written notice to Buyer and Escrow Agent; provided that the Sellers'
Representative may not be removed unless holders of a two-thirds interest of the
Escrow Fund agree to such removal and to the identity of the substituted agent.
Any vacancy in the position of Sellers' Representative may be filled by approval
of the holders of a majority in interest of the Escrow Fund. No bond shall be
required of the Sellers' Representative, and the Sellers' Representative shall
not receive compensation for his services. In the event the Sellers'
Representative has resigned and no substitute or replacement Sellers'
Representative has been appointed, the Buyer and the Escrow Agent may provide
notice to, or take other action (including actions relating to negotiation,
settlement or other resolution of any claim or Claim under section 9.04) with,
any one of the Sellers' and such notice or action shall be considered delivered
to, and to be final, binding and conclusive upon, all of the Sellers.
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(d) The Sellers' Representative shall not be liable for any act done or
omitted hereunder as the Sellers' Representative while acting in good faith and
in the exercise of reasonable judgment.
ARTICLE X
ARBITRATION
10.01 ARBITRATION. Subject to the provisions of Article I and Section
9.04, the parties hereby agree to settle any controversy, claim or dispute of
whatever nature arising between them under this Agreement or in connection with
the transactions contemplated hereunder, including those arising out of or
relating to the breach, termination, enforceability, scope or validity hereof,
whether such claim existed prior to or arises on or after the Closing Date, as
follows:
(a) As between the parties to this Agreement or any agent, employee,
parent, subsidiary, affiliate, successor or assign of the parties, any dispute,
claim or controversy directly or indirectly arising out of or related to this
Agreement (or any of the Related Documents) or the breach, termination or
validity thereof, shall be finally settled by arbitration conducted
expeditiously in accordance with the Commercial Arbitration Rules (the
"Arbitration Rules") of the American Arbitration Association ("AAA"). Within ten
(10) business days of the receipt of a list of arbitrators from the AAA, the
parties shall select a sole independent and impartial arbitrator. If the parties
are unable to agree upon an arbitrator within such period, the AAA shall appoint
an arbitrator on the eleventh (11th) day. The place of arbitration shall be
Minneapolis, Minnesota.
(b) (i) The arbitrator will issue findings of fact and
conclusions of law to support his or her opinion.
(ii) Except for damages arising out of or related to
an intentional breach of warranty or fraudulent
representation, the arbitrator shall only be empowered to
award actual and direct compensatory contract damages, and
shall not be empowered to award any special, consequential,
incidental or punitive damages or any damages related to a
tort claim.
(iii) Judgment upon the award rendered by the
arbitrator may be entered by any court having jurisdiction
thereof and enforced as any other judgment. Any party required
to resort to litigation in order to enforce an arbitral award
shall be entitled to all costs of suit including reasonable
attorneys' fees and expenses, together with interest on the
arbitral award calculated at the statutory rate for judgments
commencing ten (10) days from the date of the award.
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(iv) The arbitrator's award shall be final and
binding upon the parties and appealable only upon a showing
that it is, on its face, arbitrary, capricious, an abuse of
discretion and/or clearly contrary to statutory or settled
case law. The party appealing any award shall, if
unsuccessful, be responsible for all costs of appeal including
reasonable attorneys' fees incurred by the other party.
(v) The arbitrator shall have the power, but not the
obligation, to hire an accounting firm or other professional
within the financial services industry as an expert in order
to assist the arbitrator in issuing findings of fact.
(vi) The arbitration proceedings and all discovery
shall be confidential and neither party shall release any
decision rendered by the arbitrator to any third party.
(vii) The arbitration procedure shall be completed
promptly and a decision rendered within four (4) months of the
appointment of the arbitrator unless extended by the
arbitrator due to circumstances beyond the control of the
parties or the arbitrator or as necessary, in the arbitrator's
sole opinion, to avoid manifest injustice. Discovery shall be
limited to that which is directly relevant to the claim or
controversy and to key documents and witnesses that are
substantive and reasonably necessary to establish a party's
claim or defense. Whenever reasonably possible and unless
manifestly prejudicial or unfair, affidavits will be
substituted for direct testimony.
(viii) No arbitration may be commenced by the Sellers
unless holders of two-thirds interest in the Escrow Fund,
through the Sellers' Representative, demand such arbitration.
(c) Notwithstanding any of the foregoing, the parties
recognize that certain business relationships could give rise to the need for
one or more of the parties to seek emergency, provisional or summary injunctive
relief for various reasons, including, without limitation, to repossess and sell
or otherwise dispose of goods, equipment and/or fixtures, to prevent the sale or
transfer of goods, equipment and/or fixtures, to protect real or personal
property from injury, or to obtain possession of real estate and terminate
leasehold interests, and for other temporary injunctive relief. Immediately
following the issuance of any such relief, the parties agree to the stay of any
judicial proceedings pending arbitration of all underlying claims between the
parties.
ARTICLE XI
MISCELLANEOUS
11.01 PRESS RELEASES AND ANNOUNCEMENTS. Prior to the Closing Date,
neither party hereto shall issue any press release (or make any other public
announcement) related to this Agreement or the transactions contemplated hereby
or make any announcement to the employees,
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customers or suppliers of the Company without prior written approval of the
other party hereto, except as may be necessary, in the opinion of counsel to the
party seeking to make disclosure, to comply with the requirements of this
Agreement or applicable law. If any such press release or public announcement is
so required, the party making such disclosure shall consult with the other party
prior to making such disclosure, and the parties shall use all reasonable
efforts, acting in good faith, to agree upon a text for such disclosure which is
satisfactory to both parties.
11.02 EXPENSES. Except as otherwise expressly provided for herein with
respect to the Seller Expenses, Sellers and Buyer will pay all of their own
expenses (including attorneys' and accountants' fees (and, in the case of
Sellers and NonSeller OptionHolders, the expenses of the Company for attorneys,
accountants and Emerge Corporation)) in connection with the negotiation of this
Agreement, the performance of their respective obligations hereunder and the
consummation of the transactions contemplated by this Agreement (whether
consummated or not).
11.03 FURTHER ASSURANCES. Sellers agree that, on and after the Closing
Date, they shall take all appropriate action and execute any documents,
instruments or conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the provisions hereof, including, without
limitation, transferring all Permits and Environmental Permits to Buyer that are
transferable.
11.04 AMENDMENT AND WAIVER. This Agreement may not be amended or waived
except in a writing executed by the party against which such amendment or waiver
is sought to be enforced. No course of dealing between or among any persons
having any interest in this Agreement will be deemed effective to modify or
amend any part of this Agreement or any rights or obligations of any person
under or by reason of this Agreement.
11.05 NOTICES. All notices, demands and other communications to be
given or delivered under or by reason of the provisions of this Agreement will
be in writing and will be deemed to have been given when personally delivered or
mailed by first class mail, return receipt requested, or when receipt is
acknowledged, if sent by facsimile, telecopy or other electronic transmission
device. Notices, demands and communications to Buyer and Sellers will, unless
another address is specified in writing, be sent to the address indicated below:
Notices to Buyer: with a copy to:
---------------- --------------
CyberOptics Corporation Dorsey & Whitney
5900 Golden Hills Drive 220 South Sixth Street
Golden Valley, MN 55416 Minneapolis, Minnesota 55402
Attention: Steven M. Quist, President Attention: Thomas Martin
Fax: (612) 542-5117 Fax: (612) 340-8738
Notices to Sellers and the Company: with a copy to:
---------------------------------- --------------
Sellers' Representative: John M. Schweitzer
Peter S. Brown Stoel Rives LLP
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Imagenation Corporation 900 SW Fifth Ave
Suite K5 Suite 2300
Portland, OR 97223 Portland, OR 97204-1268
The Company:
Imagenation Corporation.
10220 SW Nimbus
Suite K5
Portland, OR 97223
11.06 ASSIGNMENT. This Agreement and all of the provisions hereof will
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, except that neither this Agreement
nor any of the rights, interests or obligations hereunder may be assigned by
either party hereto without the prior written consent of the other party hereto.
11.07 SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
11.08 COMPLETE AGREEMENT. This Agreement and the Related Agreements and
other exhibits hereto, the Disclosure Schedule and the other documents referred
to herein contain the complete agreement between the parties and supersede any
prior understandings, agreements or representations by or between the parties,
written or oral, which may have related to the subject matter hereof in any way.
11.09 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, any one of which need not contain the signatures of more than one
party, but all such counterparts taken together will constitute one and the same
instrument.
11.10 GOVERNING LAW. The internal law, without regard to conflicts of
laws principles, of the State of Minnesota will govern all questions concerning
the construction, validity and interpretation of this Agreement and the
performance of the obligations imposed by this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CYBEROPTICS CORPORATION
By
----------------------------------
Its
-----------------------------
SELLERS:
------------------------------------ ------------------------------------
Gayle Leyburn George W. Fabel
------------------------------------ ------------------------------------
Gail Marshall Peter S. Brown
------------------------------------
OSGOOD INVESTMENT PARTNERS Evelyn M. Brosnan
By
---------------------------------- ------------------------------------
Its Richard J. DeHoff
-----------------------------
------------------------------------ ------------------------------------
Ian Osgood Geary D. Lewis
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REPRESENTATIONS AND GUARANTY OF OSGOOD INVESTMENT PARTNERS
The undersigned Boyd Osgood and Dorothy Osgood hereby represent that
they are General Partners of Osgood Investment Partners, an Oregon general
partnership (the "Partnership"), and hereby make, in their personal capacities,
each and every representation contained in Article II of the foregoing Purchase
Agreement and hereby unconditionally guarantee the performance by the
Partnership of its obligations, as a Seller, under Article IX of the foregoing
Purchase Agreement.
------------------------- -------------------------
Boyd Osgood Dorothy Osgood
45
