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SCHEDULE 14C
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _____)
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[ ] Definitive Information Statement
USTMAN TECHNOLOGIES, INC.
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(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
COMMON STOCK
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(2) Aggregate number of securities to which transaction applies:
22,298,598 SHARES OF COMMON STOCK, NO PAR VALUE
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction.
$17,158,000
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(5) Total fee paid:
$3,431.60
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[ ] Fee paid previously with preliminary materials.
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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USTMAN TECHNOLOGIES, INC.
12265 W. Bayaud Ave #300
Lakewood, Colorado 80228
This information statement (the "Information Statement") is furnished
by the Board of Directors (the "Board") of Ustman Technologies, Inc., a
California corporation (the "Company"), to holders of the outstanding shares of
common stock, no par value per share (the "Common Stock"), of the Company in
connection with the written consent of stockholders representing a majority of
the issued and outstanding shares of the Company approving: (i) the sale of
substantially all of the assets of the Company (the "Proposed Sale") to
Veeder-Root Service Company ("Veeder-Root"), a wholly-owned subsidiary of
Danaher Corporation, (ii) the orderly dissolution and liquidation of the Company
and the payment of the net proceeds of the Proposed Sale pursuant to a plan of
liquidation (the "Plan of Liquidation"), and (iii) amending the Company's
Articles of Incorporation to change the Company's name within fifteen (15) days
after the closing of the Proposed Sale to "UST Liquidating Corporation". The
Proposed Sale is to be effected pursuant to that certain Asset Purchase
Agreement dated as of July 21, 2000 (the "Asset Purchase Agreement") between the
Company and Veeder-Root for an aggregate purchase price of $17,158,000 in cash
(the "Purchase Price"). The Company expects, that after the payment of (i) all
legal, accounting, investment banking and other fees and expenses related to the
Proposed Sale, (ii) the repayment in full of the $1.75 million in principal plus
accrued interest thereon of approximately $________________ to the Company's
secured lender BankBoston, and (ii) the partial repayment of the approximately
$17,500,000 liquidation preference of the Company's issued and outstanding
Series A Convertible Preferred Stock (the "Series A Preferred Stock"), there
will not be any proceeds available for distribution to the holders of the
Company's Common Stock. The purpose of this Information Statement is to inform
the Company's shareholders of certain actions that have been taken by the
Company pursuant to the unanimous approval by its Board of Directors (the
"Board") and the written consent of the holders of a majority of the outstanding
shares of Common Stock .
Since the Proposed Sale involves a sale of assets, the stockholders of
the Company will retain their equity interest in the Company following its
consummation. However, upon the closing of the Proposed Sale, the Company will
dissolve and liquidate and pay out the net proceeds of the Proposed Sale to the
holders of the Company's Series A Preferred Stock. Because it is anticipated
that the net proceeds of the Proposed Sale will not exceed the approximately
$17.5 million liquidation preference of the Series A Preferred Stock, there will
not be any proceeds available for distribution to the holders of the Company's
Common Stock.
Sagaponack Partners, L.P., a Delaware limited partnership, and
Sagaponack International Partners, L.P., a Cayman Islands exempted limited
partnership (collectively, "Sagaponack"), beneficially own, in the aggregate,
approximately 50.2% of the issued and outstanding Common Stock of the Company.
As a result, Sagaponack beneficially owns a majority of the issued and
outstanding securities of the Company entitled to vote at any meeting to
consider the Proposed Sale. On July 21, 2000, Sagaponack executed and delivered
to the Company a written consent in lieu of a meeting of shareholders (the
"Consent") approving the Asset Purchase Agreement and the Proposed Sale.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
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NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS INFORMATION STATEMENT, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THE DELIVERY OF THIS INFORMATION STATEMENT SHALL
NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THE
DATE OF SUCH DOCUMENT, OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THE DATE OF SUCH DOCUMENT.
This Information Statement is first being mailed to shareholders on or
about ___________, 2000. This Information Statement is furnished for
informational purposes only.
SUMMARY
The following is a summary of certain information contained elsewhere
in this Information Statement. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained in this
Information Statement and the Annexes thereto. Unless otherwise defined herein,
all capitalized terms used in this summary shall have the respective meanings
ascribed to them elsewhere in this Information Statement. Stockholders are urged
to read this Information Statement and the Annexes hereto in their entirety.
THE COMPANIES
The Company............................. The Company's business is primarily
providing leak detection services
to owners and operators of
underground storage tanks using a
methodology known as statistical
inventory reconciliation. The
Company's principal executive
offices are located at 12265 West
Bayaud Avenue, Suite 300, Lakewood,
Colorado 80228, and its telephone
number is (303) 986-8011.
The Purchaser........................... Veeder Root Service Company, which
is a wholly-owned subsidiary of the
Danaher Corporation, is a
manufacturer of
process/environmental controls and
tools and components.
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THE SHAREHOLDER CONSENT
Consent Required........................ Pursuant to the General Corporation
Law of the State of California, the
affirmative consent of holders of
the majority of issued and
outstanding shares of Common Stock
entitled to vote is required to
approve each of the Proposed Sale,
the Plan of Liquidation and the
change of the Company's name.
Sagaponack owns, in the aggregate,
approximately 50.2% of the issued
and outstanding shares of the
Company's Common Stock. It has
approved, in writing, each of the
Proposed Sale and the Plan of
Liquidation. Sagaponack has also
consented to amend the Company's
articles of incorporation after the
closing of the Proposed Sale to
change the Company's name to UST
Liquidating Corporation.
THE PROPOSED SALE/PLAN OF LIQUIDATION
Assets to be Sold....................... Pursuant to the Asset Purchase
Agreement, the Company and its
subsidiaries agree to sell
substantially all of its assets,
including its commercial goodwill,
fixed assets, and ongoing business
operations.
Purchase Price.......................... The Asset Purchase Agreement
provides for the sale of
substantially all of the assets by
the Company to Veeder Root for an
aggregate cash purchase price of
$17,158,000, subject to closing
balance sheet adjustments.
Closing of the Proposed Sale............ The consummation of the Proposed
Sale is expected to occur on or
about September ____, 2000.
Conditions to the Proposed Sale and
Liquidation........................ The obligation of the Company to
consummate the Proposed Sale is
subject to certain conditions
precedent customary in transactions
of this nature, including clearance
of this Information Statement by
the Securities and Exchange
Commission and distribution thereof
to the Company's shareholders. The
Plan of Liquidation is subject to
consummation of the Proposed Sale.
Approval by the Board of Directors...... The Board of Directors believes
that the Proposed Sale and the
liquidation and dissolution of the
Company are in the best interests
of the Company and has unanimously
approved the Asset Purchase
Agreement and the Plan of
Liquidation. The Board of
Directors' approval of the Proposed
Sale is based upon a number of
factors described in this
Information Statement.
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Fairness Opinion........................ The Company retained H.C.
Wainwright & Co., Inc.
("Wainwright") to provide the Board
with a fairness opinion of the
Proposed Sale, based upon
Wainwright's qualifications,
expertise and reputation. On July
21, 2000, Wainwright delivered its
opinion (the "Fairness Opinion") to
the Board which stated that, as of
the date of such Fairness Opinion,
and based upon and subject to the
assumptions, limitations and
qualifications set forth therein,
the consideration which is to be
received by the Company pursuant to
the Asset Purchase Agreement is
fair to the Company from a
financial point of view.
Use of Proceeds; Dissolution and
Liquidation Upon
the Proposed Sale.................. The gross proceeds to be received
from the Proposed Sale are
$17,158,000, subject to adjustment
based upon the Company's closing
balance sheet. From this sum,
Veeder Root will hold back
$1,500,000 from the Purchase Price
to secure, in part, the indemnity
obligations of the Company under
the Asset Purchase Agreement.
Subject to the indemnity provisions
of the Asset Purchase Agreement,
one-half of the unused portion of
the hold back will be paid to the
Company on April 1, 2002, and the
remaining unused portion of the
hold back will be paid to the
Company on April 1, 2003. The
Company intends to use the proceeds
of the Proposed Sale (i) to repay
in full the entire principal amount
of $1.75 million credit facility
currently outstanding to Bank
Boston, plus accrued interest
thereon, (ii) pay the costs
(including taxes) of effecting the
Proposed Sale, and use the
remainder to repay the
approximately $17.5 liquidation
preference with respect to the
Series A Preferred Stock. Because
it is anticipated that the proceeds
of the Proposed Sale will not
exceed the approximately $17.5
million liquidation preference of
the Series A Preferred Stock, there
will not be any proceeds available
for distribution to the holders of
the Company's Common Stock. Upon
the closing of the Proposed Sale,
the Company will effect a Plan of
Liquidation.
Tax Consequences........................ The Proposed Sale will be a taxable
transaction of the Company for
United States federal income tax
purposes and will result in a
taxable gain to the Company of
$8,000,000. Although the Company
does not expect to pay regular
income tax on the gain because it
has available to it a net operating
loss carry forward, the Company
does, however, anticipate that it
may be subject to an alternative
minimum tax of approximately
$172,000.
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Interest of Certain Persons in the
Proposed Sale...................... Messrs. Barry S. Rosenstein and
Marc A. Weisman, directors of the
Company, are co-managing general
partners of Sagaponack, which owns
of all of the Series A Preferred
Stock and 50.2% of the issued and
outstanding Common Stock. Messrs.
David Shapiro and Michael Lerner,
directors of the Company, are
limited partners of Sagaponack
Partners, L.P. Dan Cook, the
Company's Chief Executive Officer
and director of the Company, will
be employed by Veeder Root subject
to the closing of the Proposed
Sale.
Appraisal............................... Holders of shares of the Company's
Common Stock will not be entitled
to appraisal rights in connection
with the Proposed Sale.
Termination of Asset Purchase
Agreement.......................... The Asset Purchase Agreement may be
terminated prior to the closing
date in the event that certain
conditions are not met and for
certain other reasons, including,
without limitation, the Company may
terminate the Asset Purchase
Agreement to pursue an acquisition
proposal. Under certain
circumstances, including but not
limited to termination by the
Company to pursue an acquisition
proposal, the Company will be
required to pay to Veeder Root a
termination fee in the amount of
$1,000,000.
REQUIRED VOTE; WRITTEN CONSENT IN LIEU OF MEETING.
Under the California General Corporation Law (the "CGCL") and the
Company's Articles of Incorporation, the affirmative vote of holders of a
majority of the voting power of the outstanding shares of Common Stock is
required to (i) approve the Proposed Sale, (ii) approve the Plan of Liquidation,
and (iii) amend the Company's Articles of Incorporation at a duly convened
meeting of the shareholders of the Company called for such purpose. Pursuant to
Section 603 of the CGCL, any action required by the CGCL to be taken at any
meeting of shareholders of the Company may be taken without a meeting, without
prior notice and without a vote of the shareholders of the Company if a written
consent, setting forth the action to be taken, is signed by the holders of a
majority of the votes entitled to be cast at such meeting of shareholders. On
July 21, 2000, Sagaponack executed and delivered to the Company the consent
approving the Asset Purchase Agreement and the Proposed Sale. Sagaponack owns
approximately 50.2%, or an aggregate of 11,189,461 shares, of the 22,298,598
issued and outstanding shares of the Company's Common Stock. On August 16, 2000,
Sagaponack executed and delivered a consent to the Company approving the Plan of
Liquidation. Sagaponack has also agreed, upon the closing of the Asset Purchase
Agreement, to cause the Company's Articles of Incorporation to be amended to
change the name of the Company to UST Liquidating Corporation. As the holder of
the majority of the outstanding shares of the Company's Common Stock, Sagaponack
has the power to approve or disapprove any corporate action that is subject to a
vote of the Company's shareholders, in each case, regardless of how the other
shareholders of the Company may vote. Rule 14c-2(b) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") requires that this Information
Statement be sent to
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shareholders at least 20 calendar days prior to the >earliest date on which
the Merger may be effective. The closing of the Asset Purchase Agreement and the
Proposed Sale is expected to be effected as soon as practicable subsequent to
the 20th day following the date of mailing of this Information Statement.
BACKGROUND OF THE PROPOSED SALE.
The Company's business is principally providing leak detection services
to owners and operators of underground storage tanks. The Company provides this
service using a methodology known as Statistical Inventory Reconciliation
("SIR"). For the past couple of years, the Company believes that it has been at
a competitive disadvantage because it only offered its clients the SIR
methodology, and did not also offer its clients a leak detection technology
known as Automatic Tank Gauge ("ATG") technology. ATG technology automates the
data collection process, and as compared to the SIR methodology, monitors the
tanks more frequently and provides more accurate real-time leak detection. ATG
technology is also more reliable and faster, although it is more expensive than
the SIR methodology used by the Company. As a consequence, for a number of years
the Company has been trying to find a way to offer its clients ATG technology in
addition to its SIR methodology. To this end, the Company has attempted to
develop its own ATG technology, but has lacked the financial resources to do so.
The Company has also tried to purchase a manufacturer of the ATG technology, but
it has been unable to come to terms with any seller. The Company has also
attempted to explore joint ventures and/or licensing arrangements with various
entities. None of these efforts had been successful. During this time,
management has continually advised the Board that unless the Company can offer
ATG technology to its clients, the Company risks losing some of its larger
clients to other providers offering this technology.
In seeking a potential joint venture and/or licensing arrangement, the
Company spoke with, among others, Veeder-Root, a wholly-owned subsidiary of
Danaher Corporation, and the most prominent company in the industry. After
extensive discussions with Veeder-Root, neither a joint venture, licensing nor
any other transaction could be agreed upon. As an outgrowth of these
discussions, however, the Company and Veeder-Root began discussing a possible
acquisition of the Company by Veeder-Root. Consequently, after significant
negotiations with Veeder-Root, on June 6, 2000, the Company entered into a
definitive Letter of Intent with Veeder-Root to sell substantially all of the
assets of the Company for a purchase price of $17.35 million cash, without any
financing contingency, but subject to adjustment for changes in the Company's
balance sheet. The negotiations with Veeder-Root were arms-length, as there are
no pre-existing relationships between the Company and Veeder-Root or Danaher. At
the time the Letter of Intent was executed, the market capitalization of the
Company was approximately $3.8 million, notwithstanding the fact that the
Company owed approximately $2 million in principal ($250,000 of which was
subsequently repaid by the Company in accordance with the terms of the loan),
plus accrued interest, to BankBoston, and the Company's Series A Preferred Stock
had a liquidation preference, including dividends, in excess of $17 million.
In negotiating the definitive Asset Purchase Agreement, the final
Purchase Price was determined to be $17.158 million in accordance with the
balance sheet adjustments contemplated by the Letter of Intent. On July 21,
2000, the Company and Veeder-Root signed the definitive Asset Purchase Agreement
described below, a copy of which is attached hereto as Annex A.
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OPINION OF THE COMPANY'S FINANCIAL ADVISORS.
After signing the Letter of Intent, the Board immediately engaged an
independent investment bank, H.C. Wainwright & Co., Inc. ("Wainwright"), to
provide the Board with a fairness opinion of the Proposed Sale. The Board of the
Company requested Wainwright to provide an opinion as to the fairness from a
financial point of view of the consideration to be received by the Company from
the Proposed Sale. On July 21, 2000, Wainwright delivered its written opinion
(the "Fairness Opinion") which stated that, as of the date of such opinion and
based upon and subject to the assumptions, limitations and qualifications set
forth therein, the consideration to be received by the Company pursuant to the
Asset Purchase Agreement is fair to the Company from a financial point of view.
Wainwright, founded in 1868, is a Boston based investment bank that
provides integrated research, investment banking and capital markets
capabilities in a variety of growth industries. The Board selected Wainwright to
render the Fairness Opinion based upon its experience and reputation. There is
no relationship between the Company and Wainwright other than the Company's
engagement of Wainwright to render the Fairness Opinion in connection with the
Proposed Sale.
A copy of the Fairness Opinion is attached hereto as Annex B. The
summary of the Fairness Opinion set forth below is qualified in its entirety by
reference to the full text of the Fairness Opinion. Shareholders are urged to
read the Fairness Opinion carefully in its entirety for the assumptions made,
the procedures followed, the matters considered and the limits of the review
made by Wainwright in connection with such opinion.
In connection with the Fairness Opinion, Wainwright performed certain
procedures and reviewed with the management of the Company the assumptions on
which such analyses were based. The following is a summary of such analyses and
the results that were reached by Wainwright in rendering the Fairness Opinion.
In arriving at its opinion, Wainwright reviewed the public business and
financial information relating to the Company, as well as the Asset Purchase
Agreement. Wainwright also reviewed certain other information, including
financial forecasts, provided to it by the Company, and discussed with the
Company's management the business, both past and current, and future prospects
of the Company. Wainwright also considered certain financial stock market data
of the Company, and Wainwright compared that data with similar data for other
publicly-held companies and businesses that Wainwright deemed similar to those
of the Company. Wainwright also considered financial terms, to the extent
publicly available, of certain business combinations and other transactions
which have recently been effected and that Wainwright deemed relevant.
Wainwright also considered such other information, financial studies, analysis,
investigations and financial, economic and market criteria, which it deemed
relevant. In connection with its review and issuance of its opinion, Wainwright
did not assume any responsibility for independent verification of any of the
foregoing information. In addition, Wainwright did not make an independent
evaluation or appraisal of the assets or liabilities, contingent or otherwise,
of the Company, nor was Wainwright furnished with any such evaluations or
appraisals.
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Wainwright, in preparing its opinion, stated that its analyses must be
considered as a whole. Selecting portions of its analyses and factors considered
by it, without considering all analyses and factors, could create a misleading
view of the process underlying the Wainwright's opinion. Wainwright also stated
that no company or transaction used in the analyses performed by Wainwright as a
comparison is identical to the transactions contemplated by the Asset Purchase
Agreement. In addition, Wainwright may have given various analyses more or less
weight than other analyses, and may have deemed various assumptions more or less
probable than other assumptions, so that the range of valuation resulting from
any particular analysis undertaken should not be taken to be Wainwright's view
of the actual value of the Company.
In performing these analyses, Wainwright made numerous assumptions with
respect to performance, general business and economic conditions and other
matters, many of which are beyond the control of the Company. In arriving at its
opinion, Wainwright performed a number of separate and distinct analyses in
order to ascertain and support the conclusions as outlined in the opinion.
The following is a summary of all material analyses performed by
Wainwright in connection with its opinion.
Selected Precedent Transactions - Revenue Multiple Valuation
Wainwright reviewed and analyzed the publicly available information and
financial terms of four acquisitions which occurred during the period April 1999
to February 2000. Wainwright compared the publicly available statistics for
these precedent transactions to the relevant financial statistics of the
Proposed Sale based on the aggregate consideration to be received. The multiples
of the precedent transactions compared by Wainwright included, among other
things, the mean/median or otherwise adjustable transaction value of the
acquired entity to the last 12 months mean/median or otherwise adjusted revenues
of the acquired entity. Applying this transaction multiple, Wainwright derived
the implied value for the Company using the relevant financial statistics for
the Company.
Public Company Trading Valuation Analysis - Revenue Multiple Valuation
Wainwright noted that although public company valuation is
traditionally based on price earnings ratios, public companies with earnings
losses or an insignificant amount of earnings are often valued based on their
adjusted market value as a multiple of revenues and a historical and forward
looking basis. Given the Company's operating history, taking into account the
uncertainty of the Company's future prospects as a stand-alone entity,
Wainwright stated that it believed that an appropriate method of valuation for
the Company in terms of revenues is Adjusted Market Values as a multiple of the
latest 12 month revenues. Adjusted Market Value as a multiple of revenues is
defined as market capitalization, including dilution, plus total debt less cash
and cash equivalents, divided by the latest 12 months revenues. Wainwright
compared certain financial information of the Company with that of other
companies which had similar recurring revenue streams that Wainwright deemed
comparable to the Company. It was Wainwright's belief that these comparable
companies are currently valued between 0.3x and 1.7x latest 12 month revenues,
with a mean of 1.1x and a median of 1.3x latest 12 month revenues, respectively.
In accordance with the terms of the Asset Purchase Agreement, the
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Company is valued at approximately 2.6x the latest 12 month revenues, a multiple
that values the Company above the range of its comparables.
Public Trading Valuation Analysis - EBITDA Multiple Valuation
Another commonly used public marketplace valuation measures companies
operating under circumstances similar to that of the Company as a multiple of
Adjusted Market Value to EBITDA. EBITDA is defined as pretax income plus
interest expense, less interest income plus depreciation and amortization,
excluding any non-operating income/expense. Compared to companies that generate
similarly recurring streams that Wainwright deemed relevant as comparable to the
Company, it was Wainwright's belief that these companies are currently valued
between 20.8x and 2.0x trailing EBITDA with a mean of 7.6x and median 4.8x
trailing EBITDA, respectively. In accordance with the Proposed Sale, the Company
is valued at approximately 9.0x trailing EBITDA, a multiple that, Wainwright
believes, places the Company in an acceptable range of the comparables.
The Company does not make, as a matter of course, public forecasts or
projections as to future performance on earnings, operations, profitability or
other financial metrics. However, in connection with its ongoing internal
activities, the management of the Company periodically prepares projections and
financial forecasts with respect to its operations.
THE PROJECTIONS PROVIDED BY THE COMPANY TO WAINWRIGHT ARE BASED ON MANY
ESTIMATES AND ARE INHERENTLY SUBJECT TO SIGNIFICANT AND COMPETITIVE
UNCERTAINTIES AND CONDITIONS, MANY OF WHICH ARE BEYOND THE CONTROL OF MANAGEMENT
OF THE COMPANY, INCLUDING, WITHOUT LIMITATION, THE EFFECT OF GENERAL ECONOMIC
AND MARKET CONDITIONS, BUSINESS PREDICTIONS, COMPETITION, AND THE AVAILABILITY
OF CAPITAL. ACCORDINGLY, ACTUAL RESULTS MAY MATERIALLY BE HIGHER OR LOWER THAN
THOSE PROJECTED. INCLUSION OF SUCH PROJECTIONS IN WAINWRIGHT'S ANALYSES SHOULD
NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT SUCH
FINANCIAL FORECASTS OR PROJECTIONS ARE CORRECT.
Pursuant to the Company's engagement letter with Wainwright dated June
9, 2000, the Company agreed to pay Wainwright a fee for rendering its Fairness
Opinion pursuant to an agreement dated June 9, 2000. Specifically, the Company
agreed to pay Wainwright a fee of $50,000 in cash, as follows: $20,000 upon the
execution of the engagement letter and $30,000 upon completion of the Fairness
Opinion. The Company has also agreed to reimburse Wainwright for its reasonable
out-of-pocket expenses, and to indemnify Wainwright against certain liabilities,
including liabilities relating to or arising out of Wainwright's engagement.
APPROVAL BY THE BOARD OF DIRECTORS.
On July 17, 2000, the Company's Board unanimously approved the Asset
Purchase Agreement and the Proposed Sale, and recommended that each be approved
by the Company's shareholders. In approving the Asset Purchase Agreement and the
Proposed Sale, and recommending the transaction to the Company's shareholders,
the members of the Board considered various factors, including, but not limited
to, the following, all of which they believe support such approval and
recommendation:
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(i) The Company's business, its current financial condition and
results of operations, its future prospects and the current
and anticipated developments in the Company's industry;
(ii) The Board has been advised repeatedly by management that
unless it makes a strategic change, i.e., offers ATG
technology to its clients, the Company is at risk of losing
substantial client revenues which in turn could threaten the
economic viability of the Company;
(iii) The Company cannot presently afford to invest in the ATG
technology and has been unable to raise additional capital to
do so;
(iv) The Company has explored a variety of transactions in recent
years in an attempt to offer ATG technology to its client base
but has not been able to consummate any such transaction;
(v) The industry in which the Company participates is highly
specialized and dominated by relatively few players and, as a
consequence, is not attractive either to financial or general
business suitors;
(vi) The amount offered by Veeder-Root for substantially all of the
Company's assets is extremely attractive in light of the
Company's current business and prospects; and
(vii) Unless the Company completes this transaction with Veeder-Root
the business and economic value of the Company is at risk of
being significantly impaired.
In view of the wide variety of factors considered, the Board did not
find it practicable to, and did not, quantify, or otherwise attempt to assign
relative weights to, the specific factors considered or determine that any
factor was of particular importance in reaching its determination that the
Proposed Sale is fair to, and in the best interests of, the Company.
Upon consummation of the Proposed Sale, the Company will no longer have
any business operations, executive management or employees, and it is
anticipated that the proceeds from the Proposed Sale will be insufficient to
repay the entire approximately $17.5 million liquidation preference of the
Series A Preferred Stock. Accordingly, on August 16, 2000, the Board unanimously
approved the Plan of Liquidation pursuant to which the Company will wind up its
affairs and cease to exist as an operating entity.
CERTAIN EFFECTS OF THE PROPOSED SALE, PLANS FOR THE COMPANY AFTER THE PROPOSED
SALE, USE OF PROCEEDS FOLLOWING THE PROPOSED SALE.
Upon consummation of the Proposed Sale, the Company will no longer have
any operating assets or any ongoing business operations and will cease business
other than winding up its affairs and matters incidental thereto and
distributing the net proceeds of the Proposed Sale to the holders of its Series
A Preferred Stock. The Company expects to make an interim distribution to the
holders of its Series A Preferred Stock shortly after the closing of the
Proposed Sale after paying all fees and costs related to the transaction and all
outstanding bank debt. In
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addition, upon the closing of the Proposed Sale, it is anticipated that the
Company will delist the trading of its Common Stock from the OTC Bulletin Board.
In accordance with the terms of the Asset Purchase Agreement, $1,500,000 of the
Purchase Price is to be held back by Veeder Root to secure the Company's
indemnity obligations under the Asset Purchase Agreement. Subject to the
indemnity provisions of the Asset Purchase Agreement, one-half of the unused
portion of this hold back is to be paid to the Company on April 1, 2002, and the
remaining unused portion of this hold back is to be paid to the Company on April
1, 2003. Accordingly, the Company anticipates that additional distributions will
be made to the holders of the Company's Series A Preferred Stock shortly after
the release of each of these held back sums.
Each of the shareholders representing a majority of the Company's
issued and outstanding Common Stock, and the Board of Directors, unanimously,
has approved the Plan of Liquidation. The following is a summary of the material
terms and provisions of the Plan of Liquidation, a copy of which is annexed
hereto to this Information Statement as Annex C and is incorporated herein by
reference in its entirety. This summary is qualified in its entirety by
reference to the full text of the Plan of Liquidation.
The Plan of Liquidation provides that after the consummation of the
Proposed Sale the Company will not engage in any business except for the
purposes of preserving the value of the Company's assets (which will consist
principally of the proceeds of the Proposed Sale), in order to wind up the
Company's business affairs and make pro-rata distributions (the "Liquidating
Distributions") first, to the holders of the Company's Series A Preferred Stock,
and if there are any assets remaining after payment to the holders of the
Company's Series A Preferred Stock of their entire liquidation preference (which
is not anticipated to be the case), then pro rata to holders of the Company's
Common Stock; except the Company will not distribute those assets required to be
reserved for payment of any claims or obligations of the Company. It is also
further provided that, as promptly as practicable following the consummation of
the Proposed Sale, the Company will first wind up its affairs, and thereafter,
will be dissolved by filing a Certificate of Election to Wind Up and Dissolve
and a Certificate of Dissolution pursuant to the applicable provisions of the
CGCL.
Pursuant to the Plan of Liquidation, the Board of Directors may, in its
sole discretion, establish a contingency reserve to satisfy any claims against
the Company for expenses incurred in connection with the Plan of Liquidation or
otherwise, including but not limited to, reasonable payments to officers,
directors and outside professionals. Liquidating Distributions will be in
complete redemption of cancellation of all the outstanding shares of Series A
Preferred Stock. Shareholders must surrender their stock certificates (or, if
required by the Board in its absolute discretion, furnish indemnity bonds in
case of lost or destroyed certificates) as a condition of them receiving the
Liquidating Distributions.
The Plan of Liquidation provides that the Company may indemnify its
officers, directors, employees and agents in accordance with the Company's
articles of incorporation and by-laws. In the event of a vacancy occurring on
the Board for any reason, the remaining Board members (or the surviving officer
if there are no remaining Board members) have the authority to fill the vacancy,
but failure to do so will not impair the authority of the remaining Board
members to exercise the powers provided to them under the Plan of Liquidation.
The Plan of Liquidation provides that the Company may, in the absolute
discretion of the Board, pay the Company's
12
<PAGE> 13
officers, directors and employees additional compensation above their regular
compensation in recognition of any extraordinary contribution they make in
connection with the successful implementation of the Plan of Liquidation.
The Board of Directors is authorized under the Plan of Liquidation to
establish, if necessary for any reason to complete the Liquidation Distribution,
a liquidating trust into which any remaining assets of the Company may be
transferred to be held as a reserve for contingent liabilities. The Company has
no current plans to use a liquidating trust, but believes the flexibility
provided by the Plan of Liquidation to allow such a trust to be established is
advisable.
The Company intends to use the proceeds of the Proposed Sale as
follows:
(i) Repay in full the entire principal amount of the $1.75 million
loan currently outstanding to BankBoston, plus accrued
interest thereon, $_______ as of ___________, 2000;
(ii) Pay the costs of effecting the transaction, including, but not
limited to, legal fees, accounting fees, fees related to the
fairness opinion; and
(iii) Apply the balance of the proceeds to repay, in part only, the
approximately $17.5 million liquidation preference with
respect to the Series A Preferred Stock in accordance with the
express provisions of the Series A Preferred Stock.
INTERESTS OF CERTAIN PERSONS IN THE PROPOSED SALE.
Messrs. Barry S. Rosenstein and Marc A. Weisman, directors of the
Company, are co-managing partners of Sagaponack. Sagaponack owns approximately
50.2% of the issued and outstanding shares of common stock of the Company and
owns 100% of its issued and outstanding shares of Series A Preferred Stock. Each
of Messrs. David Shapiro and Michael Lerner, directors of the Company, are
limited partners of Sagaponack Partners, L.P.
Dan Cook, the Company's Chief Executive Officer and a director of the
Company, will be employed by Veeder-Root subsequent to the closing of the Asset
Purchase Agreement on terms and conditions substantially similar to the terms of
Mr. Cook's current employment arrangement with the Company.
EFFECTIVE TIME.
The effective date of the Proposed Sale will be on or about September
___, 2000.
CERTAIN INFORMATION CONCERNING THE PURCHASER.
Veeder-Root is a supplier of fuel management solutions and monitors
over 500,000 petroleum underground storage tanks at retail stations around the
world. Veeder-Root is a wholly-owned subsidiary of the Danaher Corporation, a
public company and a manufacturer of process/environmental and tools and
components.
13
<PAGE> 14
REGULATORY MATTERS.
Upon providing this Information Statement to shareholders of the
Company, the Company knows of no remaining federal or state regulatory
requirements that must be complied with or approvals that must be obtained in
order to consummate the Proposed Sale.
ACCOUNTING TREATMENT; CERTAIN FEDERAL INCOME TAX CONSEQUENCES
OF THE PROPOSED SALE.
In accordance with generally accepted accounting principles, any gain
or loss on the sale will be recognized as of the date the Asset Purchase
Agreement is closed.
The following describes the material federal income tax consequences of
the Proposed Sale to Veeder-Root. It does not attempt to provide tax advice to
any particular shareholder. It does not address state or local tax consequences
nor does it address tax consequences to specialized types of shareholders such
as foreign investors or tax-exempt stockholders. Each shareholder is urged to
discuss the tax consequences of the proposed transaction with his or her own tax
advisor.
Tax consequences at the corporate level. On the sale of the assets of
the Company, the Company generally will recognize gain for federal income tax
purposes to the extent that the amount realized on such sale of assets exceeds
the Company's basis in any assets being sold. It is presently anticipated that
the Proposed Sale will result in a taxable gain to the Company of approximately
$8,000,000 based on financial information as of March 31, 2000. The Company does
not expect to pay regular income tax on the gain due to the availability of net
operating loss carry forwards. The Company does, however, anticipate that it may
be subject to an alternative minimum tax of approximately $172,000.
Tax consequences at the stockholder level. Under current tax law, the
Proposed Sale will not have any federal income tax consequences to the
stockholders of the Company.
NO APPRAISAL RIGHTS.
Pursuant to the CGCL, holders of shares of Common Stock will not be
entitled to rights of appraisal in connection with the Proposed Sale.
THE ASSET PURCHASE AGREEMENT.
General
The following is a summary description of the material terms and
provisions set forth in the Asset Purchase Agreement, and is qualified in its
entirety by reference to the Asset Purchase Agreement, a copy of which is
attached hereto as Annex A. Shareholders are urged to review the Asset Purchase
Agreement in its entirety.
Terms which are not otherwise defined in the following summary or
elsewhere in this Information Statement shall have the meaning set forth in the
Asset Purchase Agreement.
14
<PAGE> 15
Purchase Price
The Asset Purchase Agreement provides for the sale by the Company to
Veeder-Root of substantially all of the Company's assets, and substantially all
of the assets of the Company's subsidiaries, for an aggregate Purchase Price of
Seventeen Million One Hundred Fifty-Eight Thousand Dollars ($17,158,000). The
Purchase Price is subject to adjustment based upon the difference between the
cash and debt-free net equity of the Company at the Closing Date and the cash
and debt-free net equity reflected on the Acquisition Balance Sheet in the
amount of Seven Million Four Hundred Eight Thousand Dollars ($7,408,000).
Veeder-Root will hold back One Million Five Hundred Thousand Dollars
($1,500,000) from the Purchase Price to secure the indemnity obligations of the
Company under the Asset Purchase Agreement. One-half of the unused portion of
the holdback will be paid to the Company on April 1, 2002 and the remaining
unused portion of the holdback shall be paid to the Company on April 1, 2003.
Assets to be Sold; Excluded Assets
The assets to be sold by the Company and its subsidiaries to
Veeder-Root pursuant to the Asset Purchase Agreement include substantially all
of the assets of the Company's ongoing business operations. This includes, in
addition to the Company's statistical inventory reconciliation leak detection
for underground storage tanks and product piping, the licensing of fuel
management software and the selling of related fuel management products (the
"Business"). The principal assets which comprise the Business are (a) commercial
goodwill; (b) fixed assets; (c) inventory and supplies used in manufacturing,
calibrating and testing products; (d) equipment; (e) rights, benefits and
privileges arising from contracts; (f) intellectual property; (g) notes and
trade accounts receivable; and (h) books and records.
The Company's assets that are not being sold to Veeder-Root include (a)
cash and cash equivalents; (b) the minute books and stock ledgers of the
Company; (c) the capital stock of the subsidiaries of the Company; and (d) the
assets of Toxguard Systems, Inc., subsidiary of the Company that has filed for
bankruptcy under Chapter 7 of the federal bankruptcy laws.
Liabilities
Pursuant to the Asset Purchase Agreement, as of the Closing Date,
Veeder-Root shall assume the following liabilities: (a) all obligations that
arise after the Closing Date under the Assigned Contracts; (b) all current
liabilities of the Company and its subsidiaries (other than Toxguard Systems,
Inc.) reflected on the consolidated balance sheet of the Company dated as of
December 31, 1999 or that are incurred after the Balance Sheet Date and through
the Closing Date in the ordinary course of the business consistent with past
practice; (c) to the extent accrued for on the Company's financial statements or
covered by insurance payable to Veeder-Root, certain claims by the Company's
employees; (d) all unknown claims and liabilities relating to contracts with
customers of the Business, whether relating to circumstances occurring before or
after the Closing; (e) to the extent reserved for under the Company's
self-insurance plan, all employee health care claims made under the Company's
self insurance plan; (f) certain payments due pursuant to a deferred
compensation arrangement; (g) certain royalty payments; and (h) to the extent
such liabilities are reserved for on the Company's financial statements or
covered by
15
<PAGE> 16
insurance payable to Veeder-Root, all unknown or unasserted liabilities of the
Business arising from circumstances occurring before the Closing.
Employees
Veeder-Root has agreed to offer employment to Dan R. Cook, the
Company's President and Chief Executive Officer, and James B. Grant, the
Company's Vice President, Corporate Development, at no less than each of their
respective levels of current compensation. Veeder-Root may offer employment to
the other employees of the Company after the closing of the transaction. For
those employees to whom Veeder-Root does not offer employment, Veeder-Root will
pay severance to such employees in accordance with Veeder-Root's severance
policies.
Representations And Warranties
The Asset Purchase Agreement contains various customary representations
and warranties of the Company and Veeder-Root. These include representations and
warranties by the Company as to (a) corporate organization and good standing;
(b) corporate authority to enter into the Asset Purchase Agreement; (c)
violation of any law or rights of third parties; (d) absence of claims and
business relationships with affiliates; (e) books and records; (f) improper
payments; (g) subsidiaries; (h) delivery of materials (i) financial statements
and accounts receivable; (j) absence of liabilities; (k) product and service
warranties and guaranties; (l) material permits; (m) environmental matters; (n)
personal property; (o) customers and assigned contracts and commitments; (p)
inventory; (q) insurance; (r) government contracts; (s) litigation; (t)
conformity with law; (u) taxes; (v) absence of changes; (w) intellectual
property; (x) suppliers; (y) real property; (z) title to Purchased Assets; (aa)
year 2000 compliance; (bb) powers of attorney; (cc) brokers' fees; (dd) employee
benefit plans; (ee) labor and employment matters; (ff) disclosure; (gg) SEC
reports; (hh) information; (ii) opinion of financial advisor; and (jj) voting
support agreement and irrevocably proxy.
Veeder-Root's representations and warranties include those as to (a)
corporate authority to enter into the Asset Purchase Agreement; (b) corporate
organization and good standing; (c) conflicts; and (d) brokers' fees.
The representations and warranties of the Company shall remain in
effect until April 1, 2003, except for any representations and warranties with
respect to environmental matters and tax matters, which will remain in effect
until the relevant statute of limitations has expired.
Indemnification
The Company has agreed in the Asset Purchase Agreement to indemnify and
hold harmless Veeder-Root in respect of any liabilities, losses, damages and
costs resulting from (a) any breach or inaccuracy of a representation or
warranty made by the Company in the Asset Purchase Agreement or any schedule or
certificate delivered by the Company thereunder, (b) any breach or other failure
to perform any covenant or agreement made by the Company in the Asset Purchase
Agreement, (c) any Excluded Liabilities, and (d) any lawsuit or claim by any
shareholder of the Company relating to or in any way arising out of the
transactions contemplated by the Asset Purchase Agreement. The indemnification
provision is subject to a Two Hundred Fifty Thousand Dollar ($250,000)
indemnification deductible which provides that,
16
<PAGE> 17
except for environmental matters, litigation, conformity with law, tax matters
and employee benefit plan matters, the Company shall not be required to
indemnify Veeder-Root until the aggregate amount of damages exceeds Two Hundred
Fifty Thousand Dollars ($250,000).
Guaranty
Sagaponack, which owns the majority of the issued and outstanding
shares of the Company's Common Stock and all of the issued and outstanding
shares of the Company's Series A Preferred Stock, has agreed to guaranty the
indemnification obligations of the Company in an amount up to One Million Five
Hundred Thousand Dollars ($1,500,000); provided, however, that from and after
April 1, 2002, the amount guaranteed by Sagaponack shall decrease to one-half of
the previously unused portion of the guaranty. Prior to seeking funds from
Sagaponack, Veeder-Root shall be required to seek payment of the funds from the
holdback amount under the Asset Purchase Agreement. The guaranty will expire on
April 1, 2003 except as to indemnification claims raised by Veeder-Root under
the Asset Purchase Agreement prior to April 1, 2003. This summary of the
guaranty is qualified in its entirety by reference to the full text of the
guaranty, a complete copy of which is attached hereto as Annex D.
Covenants
Pursuant to the Asset Purchase Agreement, the Company has agreed that
between the date of the Asset Purchase Agreement, July 21, 2000, and the Closing
Date, the Company shall maintain its Business, properties and facilities in good
working order and condition as it is at present, perform all of its obligations
under agreements relating to or affecting its assets, property and rights, keep
in full force and effect present insurance policies or other comparable
insurance coverage, use commercially reasonable efforts to maintain and preserve
its business organization intact, retain its present officers and key employees,
and maintain its relationships with suppliers, vendors, customers, creditors and
others having business relations with it. The Company has also agreed that the
Company shall (a) not take certain actions without the prior written consent of
Veeder-Root, (b) provide Veeder Root with access to its properties, books and
records, and (c) not solicit any proposals or engage in negotiations for the
Business or the Purchased Assets.
Non-Competition, Non Solicitation and Confidentiality
The Company has agreed for a period of four years from the Closing Date
that the Company shall not (a) compete with the Business; (b) solicit any
employees of Veeder-Root; or (c) solicit any customers of Veeder-Root. The
Company has also agreed to keep confidential all trade secrets and confidential
information concerning the operation of the Business.
Within fifteen days after the Closing Date, the Company is required to
change its name from "Ustman Technologies, Inc."
Termination
The Asset Purchase Agreement may be terminated prior to the Closing
Date in the event that certain conditions are not met and for certain other
reasons, including, without limitation, that the Company may terminate the Asset
Purchase Agreement to pursue an Acquisition
17
<PAGE> 18
Proposal. The Company shall be required to pay to Veeder-Root a termination fee
in the amount of $1,000,000, in the event that (i) the Asset Purchase Agreement
is terminated because the Company did not obtain shareholder approval, (ii) the
Company's Board of Directors fails to approve the Asset Purchase Agreement and
the transactions contemplated thereunder, (iii) the Company violates the
exclusivity provision of the Asset Purchase Agreement, (iv) Sagaponack fails to
consent to the Asset Purchase Agreement and the transaction contemplated
thereunder, or (v) the Company materially breaches a representation, warranty or
covenant set forth in the Asset Purchase Agreement.
Governing Law
The Asset Purchase Agreement is to be governed by the laws of the State
of Delaware.
REPORTING OBLIGATIONS UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.
Following the Closing, the Company intends to de-list its shares of
Common Stock from the OTC Bulletin in connection with the Plan of Liquidation.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
18
<PAGE> 19
USTMAN TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
<TABLE>
<CAPTION>
USTMAN
Technologies,
Inc. and Pro forma
ASSETS: subsidiaries Pro forma adjustments consolidated
-------------- -------------------------------------------------------------------------
(Historical)
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash $ 524,000 $ 15,658,000 (A1) $ (2,420,000) (B) $ (13,583,000) (C2) $ 179,000
Accounts receivable, net 1,341,000 (1,341,000) (A1)
Inventories 46,000 (46,000) (A1)
Prepaid expenses and other 106,000 (106,000) (A1)
------------ ------------ ------------ ------------- ------------
Total current assets 2,017,000 14,165,000 (2,420,000) (13,583,000) 179,000
Furniture, fixtures and
equipment 1,349,000 (1,349,000) (A1)
Accumulated depreciation (811,000) 811,000 (A1)
------------ ------------ ------------ ------------- ------------
538,000 (538,000)
Receivable from purchaser 1,500,000 (A1) 1,500,000
Intangible and other assets,
net 6,777,000 (6,777,000) (A1)
------------ ------------ ------------ ------------- ------------
$ 9,332,000 8,350,000 $ (2,420,000) $ (13,583,000) 1,679,000
============ ============ ============ ============= ============
</TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIT):
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Current liabilities:
Current portion of long-term
debt $ 1,000,000 $(1,000,000) (B)
Accounts payable 134,000 $ (134,000) (A1) $ $
Accrued expenses
510,000 (510,000) (A1) --
Transaction Expenses 275,000 (A2) (275,000) (B)
Income tax payable 145,000 (A3) (145,000) (B)
------------ ------------ ----------- ------------ ------------
Total current liabilities 1,644,000 (224,000) (1,420,000) --
Long-term debt, less current
portion 1,000,000 (1,000,000) (B)
Deferred gain on sale 1,500,000 (A1) 1,500,000
Deferred income taxes 27,000 (A3) 27,000
Deferred employee benefits 428,000 (428,000) (A1)
------------ ------------ ----------- ------------ ------------
Total liabilities 3,072,000 875,000 (2,420,000) -- 1,527,000
Shareholders' equity
(deficit):
Series A preferred stock 9,717,000 (9,717,000) (C)
Common stock 13,576,000 (2,639,000) (C) 10,937,000
Additional paid-in capital 1,227,000 (1,227,000) (C)
Accumulated deficit (18,260,000) 7,922,000 (A1) (10,785,000)
(275,000) (A2)
(172,000) (A3)
------------ ------------ ----------- ------------ ------------
Shareholders' equity
(deficit) 6,260,000 7,475,000 -- (13,583,000) 152,000
------------ ------------ ----------- ------------ ------------
$ 9,332,000 $ 8,350,000 $(2,420,000) $(13,583,000) $ 1,679,000
============ ============ =========== ============ ============
</TABLE>
See notes to unaudited pro forma condensed consolidated financial statements
On July 21, 2000, the Company executed a definitive Asset Purchase
Agreement with Veeder-Root, a wholly-owned subsidiary of Danaher Corporation, a
publicly traded company, to sell substantially all of the assets of the Company
to Veeder-Root for $17,158,000, of which $1,500,000 of the purchase price is to
be held back by Veeder-Root to secure indemnity
19
<PAGE> 20
obligations of the Company. The Company expects to recognize a net realized gain
and a deferred gain on the transaction, estimated to be approximately $7,922,000
and $1,500,000 respectively, based upon pro forma calculations as if the
transaction had been consummated on March 31, 2000, as discussed below. The
Company presently intends on using the proceeds of the sale to repay
indebtedness not assumed by Veeder-Root, pay transaction expenses and income
taxes on the transaction, and partially pay the liquidation preference of its
Series A Preferred Stock. It is not presently expected that there will be funds
available for distribution to common stockholders.
Upon consummation of the proposed sale, the Company will no longer have
any business operations, executive management, or employees, and the proceeds
from the proposed sale are expected to be insufficient to repay the entire
amount of the Series A liquidation preference. Accordingly, on August 15, 2000,
the Company's board of directors unanimously approved the Plan of Liquidation,
pursuant to which the Company will wind up its affairs and cease to exist as an
operating entity. Revenues and expenses of the Company subsequent to the
transaction are anticipated to consist primarily of interest income earned on
remaining cash balances and legal and accounting expenses expected to be
incurred in connection with corporate winding up and liquidation. The Company
believes that revenues and expenses subsequent to the transaction will represent
a minimal continuing impact to the Company. As a result, pro forma statements of
operations for periods prior to April 1, 2000, are not presented.
The accompanying unaudited pro forma condensed consolidated balance
sheet gives effect to the proposed sale as if it had been consummated on March
31, 2000. The unaudited pro forma condensed consolidated balance sheet should be
read in conjunction with the historical consolidated financial statements of the
Company. The unaudited pro forma condensed consolidated balance sheet does not
purport to be indicative of the financial position that actually would have
occurred had the transaction occurred on March 31, 2000, or to project the
Company's financial position to any future period.
1. Description of the transaction:
On July 21, 2000, the Company executed a definitive Asset Purchase
Agreement with Veeder-Root, a wholly-owned subsidiary of Danaher
Corporation, a publicly traded company, to sell substantially all of
the assets of the Company to Veeder-Root for $17,158,000, of which
$1,500,000 of the purchase price is to be held back by Veeder-Root to
secure indemnity obligations of the Company. One-half of the unused
portion of the holdback is to be paid to the Company on April 1, 2002,
and the remaining unused portion of the holdback is to be paid to the
Company on April 1, 2003. The Company expects to recognize a net
realized gain and a deferred gain on the transaction, calculated to be
approximately $7,922,000 and $1,500,000 respectively, based upon pro
forma calculations as if the transaction had been consummated on March
31, 2000, as discussed below. The Company presently intends on using
the proceeds of the sale to repay indebtedness not assumed by
Veeder-Root, pay transaction expenses, and partially pay the
liquidation preference of its Series A Preferred Stock. It is not
presently expected that there will be funds available for distribution
to common stockholders.
20
<PAGE> 21
Upon consummation of the proposed sale, the Company will no longer have
any business operations, executive management, or employees, and the
proceeds from the proposed sale are expected to be insufficient to
repay the entire amount of the Series A liquidation preference.
Accordingly, on August 14, 2000, the Company's board of directors
unanimously approved the Plan of Liquidation pursuant to which the
Company will wind up its affairs and cease to exist as an operating
entity. Revenues and expenses of the Company subsequent to the
transaction are anticipated to consist primarily of interest income
earned on remaining cash balances and legal and accounting expenses
expected to be incurred in connection with corporate winding up and
liquidation. The Company believes that revenues and expenses subsequent
to the transaction will represent a minimal continuing impact to the
Company. As a result, statements of operations for periods prior to
April 1, 2000, are not presented.
The unaudited condensed consolidated balance sheet as of March 31, 2000
gives effect to the transaction as if it had occurred March 31, 2000.
The final sales price will be subject to an adjustment for the
difference between the Company's actual "Cash and Debt Free Net Equity"
as of the acquisition date and the targeted "Cash and Debt Free Net
Equity" amount of $7,750,000, as defined.
2. Description of pro forma adjustments
(A1) To reflect cash proceeds of $15,658,000 and to reflect a
$1,500,000 "hold back" receivable from Veeder-Root in exchange for
Company assets with a carrying value of $8,808,000 and liabilities with
a carrying value of $1,072,000 at March 31, 2000, resulting in a net
realized gain of $7,922,000 and a deferred gain of $1,500,000.
(A2) To reflect transaction expenses, estimated to be approximately
$275,000, incurred by the Company in connection with the transaction.
(A3) To reflect estimated current and deferred income taxes totaling
approximately $172,000 ($145,000 current; $27,000 deferred) incurred in
connection with the transaction, and based on an estimated total tax
gain of approximately $8,000,000. Income tax of $172,000 represents
estimated alternative minimum tax. Regular income tax is not expected
to be incurred by the Company due to the availability of net operating
loss carry forwards.
(B) To reflect the payment of obligations not assumed by Veeder-Root,
including current and long-term debt, transaction expenses incurred in
connection with the transaction, and estimated current income taxes.
(C) To reflect the Company's liquidating distribution of all available
funds payable to the Series A preferred shareholders in accordance with
the provisions of the Series A Preferred Stock. At March 31, 2000 the
Series A Preferred Stock had a liquidation preference of $17,230,285.
21
<PAGE> 22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of July 21, 2000 of persons (other than
officers or directors of the Company) known to the Company to own more than 5%
of the Company's outstanding Common Stock. Unless otherwise indicated in the
footnotes following the table, the persons as to whom the information is given
have sole voting and investment power over the shares shown as beneficially
owned, subject to community property laws where applicable.
<TABLE>
<CAPTION>
Number of Shares Percent of Outstanding
Name Beneficially Owned Shares
<S> <C> <C>
Sagaponack Partners, L.P.
536 Pacific Avenue
San Francisco, CA 94133 10,973,461 49.2%
Sagaponack Partners International, L.P.
536 Pacific Avenue
San Francisco, CA 94133 216,000 1.0%
</TABLE>
The following table sets forth certain information regarding the
beneficial ownership of Common Stock as of July 21, 2000 of (i) each director
during the fiscal year ended June 30, 2000, (ii) the chief executive officer of
the Company, and (iii) all directors and executive officers of the Company as a
group. Unless otherwise indicated in the footnotes following the table, the
persons as to whom the information is given have sole voting and investment
power over the shares shown as beneficially owned, subject to community property
laws where applicable.
<TABLE>
<CAPTION>
Number of Shares Percent of Outstanding
Name Beneficially Owned Shares
<S> <C> <C>
Dan R. Cook
12265 W. Bayaud Avenue, #110
Lakewood, CO 80228 300,000(1) 1.3%
Barry S. Rosenstein
536 Pacific Avenue
San Francisco, CA 94133 11,189,461(2) 50.2%
Marc A. Weisman
645 Fifth Avenue, 8th Floor
New York, NY 10022 11,189,461(2) 50.2%
All current executive officers and directors as a
group (5 persons)(3) 11,489,461(4) 51.5%
</TABLE>
(1) Includes options granted by the Company to purchase up to 300,000
shares of common stock which are exercisable within 60 days.
22
<PAGE> 23
(2) Includes 10,973,461 shares of Common Stock owned by Sagaponack
Partners, L.P. and 216,000 shares of Common Stock owned by Sagaponack
Partners International, L.P., both of which may be deemed to be
beneficially owned by Messrs. Rosenstein and Weisman as co-managing
partners of each of Sagaponack Partners, L.P. and Sagaponack Partners
International, L.P.
(3) Includes David Shapiro and Michael Lerner, who became directors in
July, 2000.
(4) Includes options granted by the Company to purchase an aggregate of
300,000 shares of common stock which are exercisable within 60 days.
MARKET PRICE DATA.
The Common Stock is listed and traded on the OTC Bulletin Board and in
the National Quotation Bureau's "Pink Sheets" under the symbol USTX.OB. On July
20, 2000, the last trading day preceding the public announcement of the
execution and delivery of the Asset Purchase Agreement, the closing price per
share of Common Stock was $.06. On _________, the most recent practicable date
prior to the printing of this Information Statement, the closing price per share
of Common Stock on the Pink Sheets was $____
OTHER
On June 8, 2000, a class action complaint was filed by Stourbridge
Investments Ltd. against the Company, Barry S. Rosenstein, Marc A. Weisman, Dan
R. Cook, Danaher Corporation, Veeder-Root Service Company and RSP Capital,
L.L.C. alleging breach of fiduciary duty in connection with the Proposed Sale.
Counsel for all of the parties have agreed to extend the defendants time to
answer the complaint to August 22, 2000. In addition, a preliminary injunction
hearing with respect to the Proposed Sale is being scheduled for late
August/early September 2000 in Superior Court, County of Los Angeles.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.
The information in the following documents filed by the Company with
the Securities Exchange Commission (File No. 0-16011) pursuant to the Exchange
Act is incorporated by reference in this Information Statement:
1. The Company's Quarterly Report on Form 10-QSB, for the quarter ended
March 31, 2000.
2. The Company's Quarterly Report on Form 10-QSB, for the quarter ended
December 31, 1999.
3. The Company's Quarterly Report on Form 10-QSB for the quarter ended
September 30, 1999.
4. The Company's Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1999.
23
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5. All documents filed by the Company pursuant to Section 13(a) or 15(d)
of the Exchange Act after the date of this Information Statement and
prior to the closing of the Proposed Sale shall be deemed incorporated
by reference in this Information Statement and to be a part hereof from
the date of filing of such documents.
Any statement contained herein or in a previously filed document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Information Statement to the
extent that a statement contained herein or in any other subsequently filed
document which also is or was deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Information Statement.
The information relating to the Company contained in this Information
Statement should be read together with the information and documents
incorporated by reference. This Information Statement incorporates documents by
reference which are not presented herein or delivered herewith. Such documents
(other than exhibits to such documents, unless such exhibits are specifically
incorporated by reference) are available without charge to any person, including
any beneficial owner, to whom this Information Statement is delivered, upon
written or oral request. Request for such documents should be directed to
Heather Murphy (303) 986-8011.
FORWARD-LOOKING INFORMATION.
Statements contained in this Information Statement that are not
historical facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. In addition, the Company,
through its senior management, from time to time makes forward-looking public
statements concerning expected future operations and performance and other
developments. Such forward-looking statements are necessarily estimates
reflecting the Company's best judgment based upon current information and
involve a number of significant risks and uncertainties, and there can be no
assurance that other factors will not affect the accuracy of such
forward-looking statements. While it is impossible to identify all such factors,
factors which could cause actual results to differ materially from those
estimated by the Company include, but are not limited to, the Company's
incurring expenses in connection with its winding up, liquidation and
dissolution which are greater than those anticipated, changes in the regulation
of the industrial cleaning industry at either or both of the federal and state
levels, competitive pressures in the industrial cleaning industry and the
Company's response thereto, the general conditions in the economy and capital
markets, and other factors which may be identified from time to time in the
Company's SEC filings and in other public announcements of the Company.
AVAILABLE INFORMATION.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by the Company with
24
<PAGE> 25
the Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices at 7
World Trade Center, 13th Floor, New York, New York 10048 and Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Commission, including the Company. The address is http://www.sec.gov.
Copies of such material also can be obtained from the Public Reference Section
of the Commission, Washington, D.C. 20549 at prescribed rates.
The Common Stock of the Company is quoted on the OTC Bulletin Board and
in the National Quotation Bureau's "Pink Sheets."
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ANNEX A
EXECUTION COPY
ASSET PURCHASE AGREEMENT
By and Among
VEEDER-ROOT SERVICE COMPANY
and
USTMAN TECHNOLOGIES, INC.
dated as of July 21, 2000
<PAGE> 27
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. ASSET PURCHASE AND RELATED MATTERS.......................................................................1
1.1 Transfer of Assets..............................................................................1
1.2 Liabilities Related to the Business.............................................................4
1.3 Purchase Price..................................................................................8
1.4 Allocation of the Purchase Price...............................................................10
2. CLOSING.................................................................................................10
2.1 Location and Date..............................................................................10
2.2 Deliveries.....................................................................................10
3. REPRESENTATIONS AND WARRANTIES OF SELLER................................................................12
3.1 Organization and Qualification.................................................................12
3.2 Authorization; Validity........................................................................12
3.3 No Conflicts...................................................................................13
3.4 Absence of Claims; Business Relationships With Affiliates......................................13
3.5 Books and Records..............................................................................13
3.6 No Improper Payments...........................................................................14
3.7 Subsidiaries...................................................................................14
3.8 Complete Copies of Materials...................................................................14
3.9 Financial Statements; Accounts Receivable......................................................14
3.10 Liabilities and Obligations....................................................................15
3.11 Product and Service Warranties and Guaranties..................................................15
3.12 Material Permits...............................................................................15
3.13 Environmental Matters..........................................................................15
3.14 Personal Property..............................................................................17
3.15 Customers; Assigned Contracts and Commitments..................................................17
3.16 Inventory......................................................................................18
3.17 Insurance......................................................................................18
3.18 Government Contracts...........................................................................18
3.19 Litigation.....................................................................................19
3.20 Conformity with Law............................................................................19
3.21 Taxes..........................................................................................20
3.22 Absence of Changes.............................................................................21
3.23 Intellectual Property..........................................................................22
3.24 Suppliers......................................................................................23
3.25 Real Property..................................................................................23
3.26 Title to Purchased Assets......................................................................24
3.27 Year 2000 Compliance...........................................................................25
3.28 Powers of Attorney.............................................................................25
</TABLE>
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<TABLE>
<S> <C>
3.29 Brokers' Fees..................................................................................25
3.30 Employee Benefit Plans.........................................................................25
3.31 Labor and Employment Matters...................................................................29
3.32 Disclosure.....................................................................................29
3.33 SEC Reports....................................................................................29
3.34 Information....................................................................................30
3.35 Opinion of Financial Advisor...................................................................30
3.36 Voting Support Agreement and Irrevocable Proxy.................................................30
4. REPRESENTATIONS OF BUYER................................................................................30
4.1 Due Organization...............................................................................30
4.2 Authorization; Validity of Obligations.........................................................31
4.3 No Conflicts...................................................................................31
4.4 Broker's Fees..................................................................................31
5. COVENANTS...............................................................................................31
5.1 Access to Information..........................................................................31
5.2 Conduct of Business Pending Closing............................................................32
5.3 Prohibited Activities..........................................................................33
5.4 Exclusivity....................................................................................34
5.5 Cooperation in Obtaining Required Consents and Approvals.......................................35
5.6 Non-Competition Agreements Binding Employees of Seller or any of its Subsidiaries..............35
5.7 Sharing of Data................................................................................35
5.8 Cooperation in Litigation......................................................................36
5.9 Contracts in Progress..........................................................................36
5.10 Securities Requirements........................................................................36
5.11 Tax Matters....................................................................................37
5.12 Efforts........................................................................................38
5.13 Employee Matters...............................................................................38
5.14 Bulk Sales.....................................................................................39
5.15 Notification of Certain Matters................................................................39
5.15 Future Acquisitions............................................................................39
5.16 Post-Closing Name Change of Seller.............................................................39
5.17 Transfer of Website............................................................................39
5.18 Liability Insurance............................................................................39
5.19 Intellectual Property Matters..................................................................40
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER............................................................40
6.1 Representations and Warranties; Performance of Obligations.....................................40
6.2 No Litigation..................................................................................40
6.3 Opinions of Counsel............................................................................40
6.4 Consents and Approvals.........................................................................41
6.5 Charter Documents..............................................................................41
6.6 Sagaponack Documents...........................................................................41
6.7 No Material Adverse Change.....................................................................41
6.8 HSR Act........................................................................................41
</TABLE>
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<TABLE>
<S> <C>
6.10 Stockholder Approval...........................................................................41
6.11 Closing Deliveries.............................................................................42
6.12 Laws, Ordinances...............................................................................42
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER...........................................................42
7.1 Representations and Warranties; Performance of Obligations.....................................42
7.2 No Litigation..................................................................................42
7.3 Consents and Approvals.........................................................................42
7.4 HSR Act........................................................................................43
7.5 Opinion of Counsel.............................................................................43
8. INDEMNIFICATION.........................................................................................43
8.1 Indemnification by Seller......................................................................43
8.2 Limitation and Expiration......................................................................44
8.3 Indemnification Procedures.....................................................................44
8.4 Manner of Payment..............................................................................46
8.5 Survival of Representations, Warranties and Covenants..........................................46
8.6 Other Indemnification Matters..................................................................46
8.7 Indemnification by Buyer.......................................................................47
9. RESTRICTIVE COVENANTS...................................................................................47
9.1 Prohibited Activities..........................................................................47
9.2 Confidentiality................................................................................48
9.3 Damages........................................................................................49
9.4 Reasonable Restraint...........................................................................49
9.5 Severability; Reformation......................................................................49
9.6 Independent Covenant...........................................................................49
9.7 Materiality....................................................................................49
10. GENERAL ................................................................................................49
10.1 Termination....................................................................................49
10.2 Effect of Termination..........................................................................50
10.3 Headings.......................................................................................51
10.4 Successors and Assigns.........................................................................51
10.5 Entire Agreement...............................................................................51
10.6 Counterparts...................................................................................51
10.7 Expenses.......................................................................................51
10.8 Specific Performance; Remedies.................................................................51
10.9 Notices........................................................................................52
10.10 Governing Law..................................................................................53
10.11 Severability...................................................................................53
10.12 Absence of Third Party Beneficiary Rights......................................................53
10.13 Mutual Drafting................................................................................53
10.14 Amendment; Waiver..............................................................................53
10.15 Public Disclosure..............................................................................53
10.16 Accounting Principles..........................................................................54
10.17 Further Assurances.............................................................................54
</TABLE>
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<TABLE>
<S> <C>
10.18 Shareholder Lawsuit............................................................................54
</TABLE>
A-iv
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EXHIBITS
- --------
Exhibit 1.2(a)(iv) Watson Deferred Compensation Agreement
Exhibit 1.2(a)(v) Hunt Royalty Payments
Exhibit A General Assignment and Bill of Sale
Exhibit B Assignment and Assumption Agreement
Exhibit C Sagaponack Voting Support Agreement and Irrevocable Proxy
Exhibit D Sagaponack Guaranty
Exhibit E Indemnity Letter
Exhibit 5.13(b) Cook and Grant Offer Letters
Exhibit 5.15 Acquisition Targets
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of this 21st day of July, 2000, by and between Veeder Root Service
Company, a Delaware corporation ("Buyer"), and USTMAN Technologies, Inc., a
California corporation ("Seller").
RECITALS
A. Seller and its subsidiaries are engaged in the business of statistical
inventory reconciliation leak detection for underground storage tanks and
product piping, licensing fuel management software, selling related fuel
management products including in-tank automatic tank gauges, network data
gathering equipment and cathodic protection for underground storage tanks, and
marketing automatic tank gauge systems and regulatory compliance software (the
"Business").
B. The parties hereto wish to enter into an agreement pursuant to which Buyer
will acquire substantially all of the assets of Seller and its subsidiaries used
in the Business. Buyer will not assume any liabilities or obligations of Seller
or the Business except as expressly set forth in this Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual promises
made in this Agreement, and the representations, warranties, and covenants
contained herein, the parties hereto, intending to be legally bound, agree as
follows:
1. ASSET PURCHASE AND RELATED MATTERS
1.1 Transfer of Assets.
(a) Purchased Assets. Subject to the terms and conditions of
this Agreement and for the consideration stated in this Article 1, at the
Closing (as later defined), Seller and its subsidiaries (other than Toxguard
Systems, Inc.) shall sell, convey, assign, transfer and deliver to Buyer, and
Buyer shall purchase, acquire and accept from Seller and its subsidiaries (other
than Toxguard Systems, Inc.) all of Seller's and its subsidiaries' (other than
Toxguard Systems, Inc.) right, title and interest in and to all of the following
assets, properties and rights of Seller or any of its subsidiaries (other than
Toxguard Systems, Inc.) and relating to or used or usable in connection with the
Business (collectively, the "Purchased Assets") free and clear of any and all
Liens (as later defined):
(i) all of the items of inventory and supplies used
in manufacturing, calibrating and testing products, including without
limitation, raw materials, work-in-process, finished goods, supplies, packaging
materials, spare parts, returned products and samples, demonstration and test
instruments, any obsolete inventory or items of inventory that are not saleable
in the ordinary course of the Business and other similar items (collectively,
the "Inventory");
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(ii) to the extent transferable, telephone numbers
and e-mail addresses;
(iii) leases, subleases, and rights thereunder;
(iv) all machinery, equipment, fixtures, tools,
punches, dies, jigs, molds, furniture, fixtures, testing equipment, data
processing equipment, computers and peripheral equipment, and other similar
personal property and spare parts, including, without limitation, the items
listed in Section 1.1(a)(iv) to the Disclosure Schedule (the "Fixed Assets");
(v) to the extent transferable to Buyer, all Material
Permits (as defined in Section 3.12);
(vi) all rights, benefits and privileges under or
arising from all currently effective contracts (including, without limitation,
manufacturing contracts and supply contracts and insurance policies), purchase
orders, customer orders, customer service agreements, agreements, instruments,
licenses, or understandings and such contracts, orders, agreements, instruments,
licenses or understandings entered into by Seller between the date hereof and
the Closing in the ordinary course of the Business consistent with past practice
or as approved by Buyer pursuant to the terms of this Agreement (the "Assigned
Contracts");
(vii) all Intellectual Property used in connection
with the Business, including the trade names and trademarks USTMAN SIR SYSTEM,
USTMAN TECHNOLOGIES, INC., USTMAN Industries, Inc., EXTREME & Design, SIRAS,
Sirsend, Extreme Internet, Extreme, Extreme Fuel Management, TankTrax, all
licenses, sublicenses granted and obtained with respect thereto and rights
thereunder, remedies against infringement thereof and rights to protection of
interests therein under the laws of all jurisdictions, immunities, covenants not
to sue and the like relating to the Intellectual Property, and any claims or
causes of action arising out of or related to any past or present infringement
or misappropriation of any of the Intellectual Property, including, without
limitation, the assets set forth in Section 3.23 of the Disclosure Schedule.
"Intellectual Property" means any and all (A) trademarks (registered or
unregistered), service marks, certification marks, logos, trade names, trade
dress, and corporate names, together with all translations, adaptations,
derivations, variations, permutations and combinations thereof and including all
goodwill associated with any of the foregoing, and all registrations,
applications, filed extensions, modifications or renewals of any of the
foregoing; (B) inventions, discoveries and ideas (whether patentable or
unpatentable and whether or not reduced to practice), improvements thereto, and
patents, patent applications, and patent disclosures, together with reissuances,
continuations, continuations in-part, revisions, extensions, and reexaminations
thereof; (C) nonpublic information, trade secrets, and confidential or
proprietary business information (including ideas, research and development,
laboratory test results, know-how, formulas, compositions, manufacturing and
production processes, principles and techniques), manufacturing documentation,
technical data, internally-developed spectral libraries, algorithms, designs,
drawings (including, but not limited to, engineering drawings), blueprints,
sepias, specifications, certifications, file reports, customer and supplier
lists, pricing and cost information, business and marketing plans, proposals and
studies (where there are multiple copies of such material in Seller's possession
or control, all copies of such material) and rights in any jurisdiction to limit
the use or disclosure thereof by any person; (D) copyrightable works and
writings (whether or not copyrighted), copyrights, and applications,
registrations, and
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renewals in connection therewith; (E) computer programs and software (including
source code, object code, data and related documentation); (F) other proprietary
rights; and (G) copies and tangible embodiments of any of the foregoing items
(A) through (F);
(viii) originals or true copies of all of the books,
records, ledgers, data and information, files, documents, correspondence, tests,
plats (collectively, "Books and Records"), including without limitation all
general, financial and accounting records, purchase orders and invoices, sales
orders and sales order log books, correspondence and miscellaneous records with
respect to customers and supply sources, and all other general correspondence;
(ix) the goodwill relating to the Business or any of
the Purchased Assets;
(x) claims, deposits, prepayments, refunds, causes of
action, chooses in action, rights of recovery, rights of set off, and rights of
recoupment (but not including any such item relating to payment of Taxes (as
later defined));
(xi) all notes and trade accounts receivable
(including without limitation current, past, reserved or written-off accounts
receivable, accounts receivable from any of Seller, its subsidiaries or
operating divisions and businesses, and receivables from and advances to
employees, collectively such items being the "Accounts Receivable") and all
notes, bonds and other evidences of indebtedness of and rights to receive
payments from any Person (as defined in Section 9.1);
(xii) all advertising, marketing and other similar
materials, including without limitation, the material and content included in
Seller's website;
(xiii) all motor vehicles; and
(xix) any and all other items of any kind, tangible
or intangible, used or usable in the Business.
(b) Excluded Assets. The Purchased Assets shall not include,
and from and after the Closing, Seller and its subsidiaries shall retain all of
its right, title and interest in and to all of the following assets (the
"Excluded Assets"):
(i) cash and cash equivalents;
(ii) the capital stock of any of the subsidiaries of
Seller;
(iii) all assets of Toxguard Systems, Inc.;
(iv) the minute books and stock ledgers of Seller and
each of its subsidiaries; and
(v) all assets and properties of Seller or any of its
subsidiaries not included in the Purchased Assets.
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(c) Instruments of Transfer. On the Closing Date (as later
defined), Seller and its subsidiaries (other than Toxguard Systems, Inc.) shall
transfer to Buyer valid and legal title to all of the Purchased Assets, free and
clear of any Liens. "Lien" means any mortgage, security interest, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, Lien (statutory or
otherwise), charge, priority or other security agreement, right of first
refusal, restriction on transfer (other than restrictions imposed by federal and
state securities laws), or any restriction on the transfer of any assets, any
conditional sale or other title retention agreement, any financing lease
involving substantially the same economic effect as any of the foregoing and the
filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction). The transfer of the Purchased Assets shall
occur by delivery of the instruments of transfer described in Section 2.2.
1.2 Liabilities Related to the Business.
(a) Assumed Liabilities. On and subject to the terms and
conditions of this Agreement and further subject to the limitations set forth in
Section 1.2(b), Buyer shall assume at the Closing and subsequently pay, honor
and discharge, according to the terms thereof, the following obligations and
liabilities other than the Excluded Liabilities (collectively, the "Assumed
Liabilities") relating to the Business:
(i) all obligations that arise after the Closing
under the Assigned Contracts;
(ii) all current liabilities of Seller and its
subsidiaries (other than Toxguard Systems, Inc.) reflected on the consolidated
balance sheet of Seller dated as of December 31, 1999 (such balance sheet being
the "Acquisition Balance Sheet" and such date being the "Balance Sheet Date"),
or that are incurred after the Balance Sheet Date and through the Closing Date
in the ordinary course of the business consistent with past practice;
(iii) to the extent accrued for on the Seller
Financial Statements (as later defined) or the Closing Balance Sheet or covered
by insurance payable to Buyer, all liabilities and obligations of Seller or any
of its subsidiaries (other than Toxguard Systems, Inc.) regarding, and claims
with respect to, (A) all compensation earned or accrued by employees of Seller
or any of its subsidiaries while employed by Seller or any of its subsidiaries
on or before the Closing, including without limitation, accrued salary and wages
(including overtime), accrued vacation time and personal time, sick leave,
incentive or bonus compensation, retention, severance, termination, and
redundancy pay, and pay in lieu of notice; (B) any other benefits owed to any
current or former employee of Seller or any of its subsidiaries (other than
Toxguard Systems, Inc.) whose employment ends (or is treated as ending) in
connection with completing the transactions this Agreement contemplates; and (C)
any expenses associated with workers' compensation claims or for medical, dental
and disability (both long-term and short-term) benefits owed to employees or
former employees of Seller or any of its subsidiaries based upon (1) exposure to
conditions existing before the Closing or (2) disabilities existing before the
Closing;
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(iv) payments due to Charlie Watson ("Watson") after
the Closing pursuant to the deferred compensation arrangement between Seller and
Watson, a copy of which is attached hereto as Exhibit 1.2(a)(iv);
(v) all royalty payments due to Seth Hunt on the
terms and subject to the conditions as set forth in the attached Exhibit
1.2(a)(v);
(vi) all unknown claims and liabilities relating to
contracts with customers of the Business whether relating to circumstances
occurring before or after Closing;
(vii) all unknown or unasserted liabilities of the
Business arising from circumstances occurring before Closing but solely to the
extent that such liabilities are either reserved for by Seller on the Seller
Financial Statements or covered by insurance payable to Buyer;
(viii) all employee health care claims made under
Seller's self-insurance plan, solely to the extent reserved for under such
self-insurance plan; and
(ix) all liabilities of Seller exclusively related to
the conduct of the Business in the ordinary course of business consistent with
past practice (including without limitation false alarm guaranties).
(b) Excluded Liabilities. Except as specifically set forth in
Section 1.2(a), Buyer does not and will not assume or become responsible for,
and Seller and its subsidiaries shall remain solely liable for, any and all
liabilities or obligations of any kind (whether fixed or contingent, liquidated
or unliquidated, matured or unmatured, known or unknown, whether arising out of
occurrences prior to, at or after the Closing) of Seller, any of its
subsidiaries, or any of its affiliates (as defined in Rule 12b-2 under the
Securities Exchange Act of 1934 (each an "Affiliate")) that are not Assumed
Liabilities whether or not relating to the Business (collectively, the "Excluded
Liabilities"). Without limiting the generality of the foregoing, subject to
Section 1.2(a), the Excluded Liabilities shall include the following:
(i) all liabilities and obligations of Seller or any
of its subsidiaries for costs and expenses arising out of or in connection with
this Agreement or the consummation of the transactions contemplated by this
Agreement;
(ii) all liabilities and obligations of Seller or any
of its subsidiaries under this Agreement or any agreement or instrument attached
hereto as an exhibit or contemplated to be entered into hereby (the "Ancillary
Agreements");
(iii) all liabilities or obligations of Seller or any
of its subsidiaries arising out of the matters, if any, described in Sections
3.13(a), 3.19 or 3.20 of the Disclosure Schedule;
(iv) all liabilities and obligations of Seller
related to the Excluded Assets;
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(v) all liabilities and obligations of Seller or any
of its subsidiaries for (A) to the extent not accrued for or covered by
insurance payable to Buyer, any expenses associated with workers' compensation
claims or for medical, dental and disability (both long-term and short-term)
benefits, whether insured or self-insured, owed to employees or former employees
of Seller or any of its subsidiaries based upon (1) exposure to conditions
existing before the Closing or (2) disabilities existing before the Closing; (B)
related to or arising out of any suit, claim, action or cause of action by any
employee of Seller or any of its subsidiaries against Seller or any of its
subsidiaries, or any of their respective officers, directors, shareholders,
other employees or representatives; or (C) any administrative action against
Seller or any of its subsidiaries arising under the Occupational Safety and
Health Act, as amended, for actions, events or circumstances occurring before
the Closing;
(vi) all liabilities, obligations and claims with
respect to product liability, personal injury or property damage arising out of
events or occurrences relating to products manufactured or services provided on
or prior to the Closing Date (whether or not such event or occurrence arises
after the Closing Date) other than product liability, personal injury or
property damage liabilities, obligations and claims arising under the Assigned
Contracts (which product liability, personal injury and property damage
liabilities, obligations and claims are assumed liabilities of Buyer pursuant to
Section 1.2(a)(i));
(vii) all liabilities and obligations of Seller or
any of its subsidiaries arising prior to the Closing under any of the Assigned
Contracts that mature or become conditionally due and payable prior to the
Closing, and all liabilities for any breach, act or omission by Seller or any of
its subsidiaries prior to the Closing under any Assigned Contract raised or
asserted prior to Closing;
(viii) any liability of Seller or any of its
subsidiaries for Taxes (it being understood and agreed that Buyer shall not be
deemed to be Seller's, or any of Seller's subsidiaries', transferee with respect
to any liabilities of Seller or any of its subsidiaries with respect to Taxes).
For the purposes of this Agreement, the term "Tax" or "Taxes" means any federal,
state, local, or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental,
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not;
(ix) any liability of Seller or any of its
subsidiaries for income and other Taxes arising in connection with the
consummation of the transactions contemplated hereby, provided however that
Buyer shall pay all transfer, sales and use Taxes arising in connection with the
consummation of the transactions contemplated by this Agreement;
(x) any liability of Seller or any of its
subsidiaries for the unpaid Taxes of any person other than Seller or any of its
subsidiaries as a transferee or successor, by contract or otherwise;
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(xi) all liabilities, obligations and claims (whether
matured or unmatured, liquidated or unliquidated, fixed or contingent, known or
unknown) relating to, arising out of, or attributable, in whole or in part, to
the manufacture, importation, processing, distribution, use, treatment, storage,
release, disposal, arranging for disposal, transport or handling of any
Hazardous Materials (as defined in Section 3.13) by Seller or any of its
subsidiaries or by any of their predecessors in interest, or relating to or
arising from or attributable, in whole or in part, to the manufacture,
processing, importation, distribution, use, treatment, storage, release,
disposal, arranging for disposal, transport or handling of any such substance by
any other person on or prior to the Closing Date, or arising from migration of
substances from adjacent properties on or prior to the Closing Date;
(xii) all liabilities and obligations of Seller or
any of its subsidiaries arising out of events, conduct, or conditions existing
or occurring prior to the Closing that constitute a violation of or
noncompliance with any law, rule or regulation, any judgment, decree or order of
any foreign, federal, state or local government, regulatory or administrative
authority or agency, court, tribunal, or arbitrational tribunal (each a
"Governmental Entity"), any breach of fiduciary duty to the stockholders of
Seller under state or federal law, or any Material Permits;
(xiii) all liabilities and obligations of Seller or
any of its subsidiaries for injury to or death of persons or damage to, or
destruction of, property occurring prior to the Closing;
(xiv) all liabilities of Seller or any of its
subsidiaries arising out of any claim, suit, action, arbitration, proceedings,
investigation or other similar matter which commenced or relates to the
ownership of the Purchased Assets or the operation of the Business on or prior
to the Closing, including without limitation any obligations and liabilities
arising out of the matters disclosed in Section 3.19 of the Disclosure Schedule
and any litigation related thereto or arising out of the subject matter thereof;
(xv) all intercompany liabilities of Seller or any of
its subsidiaries and any Affiliate of Seller or any of its subsidiaries
including without limitation the liabilities of Seller relating to that certain
Management Fee Contract with Sagaponack Partners, L.P. ("Sagaponack") dated May
22, 1997;
(xvi) all liabilities and obligations with respect to
matters for which any provision of this Agreement provides that Buyer shall
assume no liability;
(xvii) all liabilities and obligations of Seller or
any of its subsidiaries arising out of events, conduct or conditions existing or
occurring prior to the Closing that constitute or allegedly constitute an
infringement in violation of, or constitute or allegedly constitute a
misappropriation of, any Intellectual Property rights of any other person or
entity;
(xviii) any liability of Seller, any of its
subsidiaries or Toxguard Systems, Inc. relating to Toxguard Systems, Inc., its
assets or its business, including without limitation any liability relating to
or arising out of the bankruptcy of Toxguard Systems, Inc.;
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(xix) all liabilities and obligations arising out of
or relating to the actions or omissions of Seller's or any of its subsidiaries'
directors, officers, shareholders, employees, or agents prior to, on or after
the Closing Date;
(xx) all liabilities of Seller or any of its
subsidiaries for funded debt (including without limitation any accrued by unpaid
interest thereon and any dividends payable in respect of any shares of capital
stock of Seller or any of its subsidiaries);
(xxi) all liabilities of Seller or any of its
subsidiaries or any of their respective officers, directors, employees or other
agents relating to or in any way arising out of any lawsuit by any shareholder
of Seller relating to or in any way arising out of the transactions contemplated
by this Agreement;
(xxii) any liability or obligation of Seller or any
of its subsidiaries not expressly assumed by Buyer pursuant to Section 1.2(a);
and
(xxiii) any liability or obligation of Seller under
the employment agreement between Seller (f/k/a Watson General Corporation) and
Dan R. Cook dated May 21, 1997, the employment agreement between Seller (f/k/a
Watson General Corporation) and James B. Grant dated December 18, 1997, or any
other employment agreement between the Seller or any of its subsidiaries and any
employee thereof other than the employment arrangements that Buyer is
specifically assuming pursuant to Section 5.13 of this Agreement.
1.3 Purchase Price.
(a) The aggregate purchase price for the Purchased Assets (the
"Purchase Price") shall be Seventeen Million One Hundred Fifty-Eight Thousand
and 00/100 U.S. Dollars ($17,158,000.00), subject to adjustment as provided in
this Section 1.3 or in Section 1.4.
(b) Buyer and its authorized representatives shall have the
right to review such workpapers and other documents and information used by
Seller, its subsidiaries and its authorized representatives in the preparation
of the Acquisition Balance Sheet. Within sixty (60) days after the Closing Date,
Buyer shall, with the assistance of Seller, prepare and deliver to Seller an
unaudited consolidated balance sheet of Seller and its subsidiaries dated as of
the Closing Date (the "Closing Balance Sheet"), which fairly present the
financial condition of Seller and its subsidiaries as of the Closing Date and
which sets forth the "Cash and Debt Free Net Equity" of Seller and its
subsidiaries as of the Closing Date (the "Closing Cash and Debt Free Net
Equity"). "Cash and Debt Free Net Equity" shall mean the shareholders' net
equity of Seller less cash and cash equivalents of Seller and its subsidiaries
plus current portion of long-term debt of Seller and its subsidiaries plus
long-term debt of Seller and its subsidiaries. The parties agree that the Cash
and Debt Free Net Equity of Seller and its subsidiaries as reflected on the
Acquisition Balance Sheet as of the date thereof is Seven Million Four Hundred
Eight Thousand and 00/100 U.S. Dollars ($7,408,000.00). The Closing Balance
Sheet shall be prepared in a manner consistent with the Acquisition Balance
Sheet and GAAP consistently applied.
(c) Seller and its authorized representatives shall have the
right to review such workpapers and other documents and information used by
Buyer and its authorized representatives in the preparation of the Closing
Balance Sheet and calculation of the Closing
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Cash and Debt Free Net Equity. The Closing Balance Sheet shall be final and
binding on Seller and Buyer unless Seller objects, by giving written notice to
Buyer within thirty (30) days after Seller's receipt of the Closing Balance
Sheet, to any items in the Closing Balance Sheet or the computation of Closing
Cash and Debt Free Net Equity. Such notice shall state in reasonable detail the
item or items in dispute, and shall state the amount, if any, of any adjustment
that should be made to the Closing Balance Sheet. Any Purchase Price Adjustment
(as defined below) that would result from any item or items not in dispute will
be made on the fifth business day following delivery of Seller's written notice
of dispute.
(d) In the event of a dispute, Buyer and Seller will use their
commercially reasonable best efforts to resolve any such objections and any
resolution by them shall be final and binding on them. If Buyer and Seller do
not resolve any such dispute within fifteen (15) days after Buyer receives
Seller's written notice of dispute, then Buyer and Seller shall, within five (5)
business days, submit any such unresolved dispute to the Philadelphia office of
KPMG International (the "Neutral Accountant") which firm shall, within thirty
(30) days of such submission, resolve such remaining dispute and such resolution
shall be binding and conclusive on the parties. The fees and expenses of the
Neutral Accountant shall be shared equally by Buyer and Seller. If issues in
dispute are submitted to the Neutral Accountant for resolution, each party will
furnish to the Neutral Accountant such workpapers and other documents and
information relating to the disputed issues as the Neutral Accountant may
request and are available to that party, and each party will be afforded the
opportunity to present to the Neutral Accountant any material relating to the
determination and to discuss the determination with the Neutral Accountant. The
determination by the Neutral Accountant of the Closing Balance Sheet and the
Closing Cash and Debt Free Net Equity as set forth in a notice delivered by the
Neutral Accountant to both parties will be final and binding on the parties.
(e) If the Closing Cash and Debt Free Net Equity of Seller is
less than Seven Million Four Hundred Eight Thousand and 00/100 U.S. Dollars
($7,408,000.00) (the "Target Amount"), the Purchase Price shall be reduced by an
amount equal to the amount by which the Closing Cash and Debt Free Net Equity is
less than the Target Amount. If the Closing Cash and Debt Free Net Equity of
Seller is greater than the Target Amount, the Purchase Price shall be increased
by an amount equal to the amount by which the Closing Cash and Debt Free Net
Equity is greater than the Target Amount.
(f) The adjustment, if any, to the Purchase Price (the
"Purchase Price Adjustment"), shall be determined and made (taking into account
payments made pursuant to Section 1.3(c)) on the fifth day following final
determination of the Closing Balance Sheet and the Closing Cash and Debt Free
Net Equity.
(g) The parties agree that Buyer shall be permitted to
holdback from the Purchase Price to be delivered at Closing (the "Holdback") the
sum of One Million Five Hundred Thousand and 00/100 U.S. Dollars ($1,500,000.00)
to secure the indemnity obligations of Seller under this Agreement. Buyer shall
deliver one-half of the unused portion of the Holdback to Seller on April 1,
2002, and the remaining unused portion of the Holdback to Seller upon the
expiration of the Survival Period. Any portion of the Holdback not used to
satisfy an indemnification obligation of Seller hereunder shall accrue interest
at the prevailing published money market rate available from Citibank in New
York City.
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(h) The parties agree that the cost of Seller's obligation
under Section 5.18 shall be reflected as a liability of Seller on the final
Closing Balance Sheet.
1.4 Allocation of the Purchase Price. The parties agree that the amount
equal to the Purchase Price set forth in Section 1.3 shall be allocated, for
purposes of Section 1060 of the Internal Revenue Code of 1986 (the "Code"),
among the Purchased Assets in the manner set forth in Section 1.5 of the
Disclosure Schedule. (the "Allocation"). The parties agree that all Tax Returns
(as defined below) and reports (including without limitation Form 8594 ("Asset
Acquisition Statement")), and all financial statements shall be prepared in a
manner consistent with (and the parties shall not otherwise take a position
inconsistent with) the Allocation unless required by the IRS or a state taxing
authority.
2. CLOSING
2.1 Location and Date. The completion of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Wilmer,
Cutler & Pickering, 2445 M Street, N.W., Washington, D.C. 20037 at 10:00 a.m. as
soon as practicable after the satisfaction or waiver of the conditions precedent
to Closing contained in this Agreement, which date shall be referred to as the
"Closing Date."
2.2 Deliveries.
(a) Seller Deliveries. At the Closing, Seller and its
subsidiaries shall deliver to Buyer the following:
(i) a general assignment and bill of sale in the form
of Exhibit A attached hereto;
(ii) assignments of Intellectual Property duly
executed by Seller, each in a form reasonably acceptable to Buyer, in recordable
form to the extent necessary to assign such rights;
(iii) executed consents required to be delivered as a
condition to Closing as set forth in Section 6.4;
(iv) duly executed closing certificates, dated as of
the Closing Date, with respect to the matters set forth in Sections 6.1, 6.2,
6.5, 6.7, and 6.10;
(v) good standing certificates of Seller certifying
as of a date no later than ten (10) days prior to the Closing Date that Seller
is in good standing under the laws of the State of California, the State of
Colorado and each other jurisdiction where Seller conducts business certifying
that Seller is qualified to do business in such jurisdiction as a foreign
corporation;
(vi) opinion of counsel to Seller in the form
required by Section 6.3 hereto;
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(vii) evidence of the discharge of any and all Liens
on any of the Purchased Assets existing prior to the Closing;
(viii) an assignment and assumption agreement in
substantially the form attached hereto as Exhibit B (the "Assumption Agreement")
duly executed by Seller that evidences Buyer's assumption of the Assumed
Liabilities;
(ix) certificates of title for all motor vehicles
comprising part of the Purchased Assets and appropriate transfer forms duly
executed by Seller or one of its subsidiaries, as applicable;
(x) payment of the fees of Buyer's counsel incurred
as of the Closing Date relating to the Lawsuit (as later defined) as provided in
Section 10.18;
(xi) an affidavit duly executed by Seller and each of
its subsidiaries (other than Toxguard Systems, Inc.) in a form reasonably
acceptable to Buyer stating, respectively, that Seller and each of such
subsidiaries is not a foreign person pursuant to Section 1445 of the Code;
(xii) documents and instruments duly executed by
Seller that can be delivered to Network Solutions that are sufficient to
transfer control of the URL www.ustman.com to Buyer; and
(xiii) such other deeds, bills of sale, documents,
instruments and writings in form and substance acceptable to Buyer as are
required to effectively vest in Buyer all of Seller's and each of its
subsidiaries' right, title and interest in and to the Purchased Assets free and
clear of all Liens according to the provisions hereof or to complete the
transactions contemplated by this Agreement.
(b) Buyer Deliveries. Upon the terms and subject to the
conditions contained herein, at Closing, Buyer shall deliver to Seller:
(i) the Assumption Agreement duly executed by Buyer;
(ii) a duly executed closing certificate, dated as of
the Closing Date, with respect to the matters set forth in Sections 7.1 and 7.2;
(iii) the Purchase Price less the Holdback; which
shall be paid on the Closing Date if the Closing occurs before 12:00 p.m.
Eastern Time, or shall be paid the next business day following the Closing Date
if the Closing occurs after 12:00 p.m. Eastern Time; provided that if the
Closing Payment is to be delivered the next business day following the Closing,
the parties agree to close the transactions into escrow, which escrow shall be
released immediately upon the delivery of the Closing Payment;
(iv) a good standing certificate of Buyer certifying
as of a date no later than ten (10) days prior to the Closing Date that Buyer is
in good standing under the laws of the State of Delaware;
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(v) an opinion of counsel to Buyer in the form
required by Section 7.5; and
(vi) a copy of the resolutions of Buyer's board of
directors approving the execution and delivery of this Agreement and the
performance of Buyer's obligations hereunder certified to be true and accurate
without amendment by the Secretary of Buyer.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Buyer to enter into this Agreement and consummate the
transactions contemplated hereby and except as disclosed by specific reference
to the applicable section of the Disclosure Schedule delivered by Seller to
Buyer concurrently herewith (the "Disclosure Schedule"), Seller makes the
following representations and warranties to Buyer. For purposes of this
Agreement, "knowledge" of Seller and "to Seller's knowledge" includes the
knowledge of Dan R. Cook, James B. Grant, Heather Murphy, Barry S. Rosenstein
and Marc A. Weisman, and shall include knowledge of any fact or circumstance
that, if it were not willfully disregarded, would have or should have come to
the attention of any such person in the course of discharging his or her duties
in a reasonable and prudent manner consistent with sound business practices.
3.1 Organization and Qualification. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California. Seller has the requisite corporate power and authority to own,
operate or lease its properties and to carry on its business as it is now being
conducted, and is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction in which the nature of its business or the
properties owned, operated or leased by it makes such qualification, licensing
or good standing necessary which failure to qualify, be licensed or be in good
standing would have a material adverse effect on the business, operations,
affairs, prospects, properties, assets, profits or condition (financial or
otherwise) of the Business (a "Material Adverse Effect"). Section 3.l of the
Disclosure Schedule contains a list of all jurisdictions in which Seller is
authorized or qualified to do business. Seller has delivered to Buyer true,
complete and correct copies of the Certificate of Incorporation and Bylaws of
Seller. Such Certificate of Incorporation and Bylaws are collectively referred
to as the "Charter Documents."
3.2 Authorization; Validity. Seller and Seller's representative signing
this Agreement have the full legal right and all requisite corporate power and
authority to execute and deliver this Agreement and except for any required
approval by Seller's shareholders in connection with the consummation of the
transactions contemplated by this Agreement to perform its obligations pursuant
to the terms of this Agreement. The execution and delivery of this Agreement by
Seller and the performance by Seller of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of Seller and no
other corporate proceedings on the part of Seller are necessary to authorize or
approve this Agreement or to consummate the transactions contemplated hereby
(other than the approval of this Agreement by the affirmative vote of the
holders of a majority of the then outstanding shares of common stock of Seller
entitled to vote thereon, to the extent required by applicable law). This
Agreement has been duly and validly authorized by Seller. This Agreement is a
legal, valid and binding obligation of Seller, enforceable against Seller
according to its terms.
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3.3 No Conflicts. Except as set forth in Section 3.3 of the Disclosure
Schedule, the execution, delivery and performance of this Agreement, the
consummation of the transactions contemplated hereby, and the fulfillment of the
terms hereof will not:
(a) conflict with, or result in a breach or violation of any
of the Charter Documents or any resolution of the Board of Directors or
stockholders of Seller;
(b) conflict with, result in a breach of, constitute a default
(or an event that with notice or lapse of time or both could become a default)
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any note, contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest (as defined below) or other
arrangement to which Seller is a party or by which Seller is bound or to which
any of the Purchased Assets is subject. For purposes of this Agreement,
"Security Interest" means any mortgage, pledge, security interest, encumbrance,
charge or other Lien, whether arising by contract or by operation of law, other
than Liens for Taxes not yet due and payable;
(c) result in the creation or imposition of any Lien on any of
the Purchased Assets, pursuant to (i) any law or regulation to which Seller or
any of its property is subject, or (ii) any judgment, litigation, order or
decree to which Seller is bound or any of its property is subject;
(d) violate any constitution, statute, law, ordinance, rule,
regulation, decree, order, injunction, judgment, ruling, charge or other
restriction of any Governmental Entity to which Seller is subject or by which
Seller is bound;
(e) require Seller to file with or to obtain the permission,
authorization, consent or approval of any Governmental Entity or give any
Governmental Entity the right to challenge any of the transactions contemplated
by this Agreement; or
(f) result in a breach or violation of, a default under or the
triggering of any payment or other obligations pursuant to, any of Seller's
existing Business Benefit Arrangements or Business Benefit Plans or any grant or
award made under any of the same.
3.4 Absence of Claims; Business Relationships With Affiliates. Except
as set forth on Section 3.4 of the Disclosure Schedule, neither Seller, nor any
of its Affiliates or stockholders (a) owns any property or right, tangible or
intangible, which is used in the Business, or (b) to Seller's knowledge, has any
claim or cause of action against Seller in connection with the Business or any
of the Purchased Assets.
3.5 Books and Records. Seller has made and kept (and given Buyer access
to) books and records and accounts, which, in reasonable detail, accurately and
fairly reflect the activities of Seller and the subsidiaries. Seller has not
engaged in any transaction, maintained any bank account or used any corporate
funds except for transactions, bank accounts and funds which have been and are
reflected in the normally maintained books and records of Seller and its
subsidiaries.
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3.6 No Improper Payments. Neither Seller nor any agent of Seller, or,
any person or entity associated with or acting for or on behalf of Seller, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment, kickback, or other payment to any person or entity, private
or public, regardless of what form, whether in money, property, or services (i)
to obtain favorable treatment for business secured, (ii) to pay for favorable
treatment for business secured, (iii) to obtain special concessions or for
special concessions already obtained, or (iv) in violation of any legal
requirement, or (b) established or maintained any fund or asset that has not
been recorded in the books or records of Seller. Seller and all agents,
employees and other parties who have acted on behalf of Seller have acted in
full compliance with the Foreign Corrupt Practices Act of 1977, codified as
amended at 15 U.S.C. ss.ss. 78m(b)(2), 78dd-1, 78dd-2, and 78ff(c).
3.7 Subsidiaries. None of Seller's subsidiaries owns or holds title to
any of the Purchased Assets.
3.8 Complete Copies of Materials. Seller has delivered or made
available to Buyer true and complete copies of each written agreement, contract,
commitment or other document (or summaries of same) that is referred to in the
schedules to this Agreement or that are included in the Purchased Assets.
3.9 Financial Statements; Accounts Receivable.
(a) Attached as Section 3.9 to the Disclosure Schedule are
true, complete and correct copies of (i) Seller's audited consolidated balance
sheets, statements of income, and cash flow for the fiscal years ended June 30,
1997, June 30, 1998, and June 30, 1999, (ii) the Acquisition Balance Sheet, and
(iii) Seller's unaudited consolidated balance sheets, statements of income and
cash flow for the fiscal year ended June 30, 2000 (the items in the foregoing
(i), (ii) and (iii) being collectively, the "Seller Financial Statements"). The
Seller Financial Statements (including the notes thereto) and the Acquisition
Balance Sheet have been prepared in accordance with GAAP (as defined in Section
10.16) consistently applied, and fairly present the financial condition of
Seller. Since the dates of the Seller Financial Statements and the Acquisition
Balance Sheet, there have been no material changes in Seller's accounting
policies. The revenues of Seller and its subsidiaries for the six month period
ended December 31, 1999, were not less than Three Million Forty-Five Thousand
and 00/100 U.S. Dollars ($3,045,000.00) and the operating profit of Seller and
its subsidiaries for the six month period ended December 31, 1999, was not less
than Four Hundred Twenty-Five Thousand and 00/100 U.S. Dollars ($425,000.00)
(before write-off of offering costs relating to the rights offering for
9,941,624 shares of common stock commenced by Seller and filed with the SEC on
Form S-1 on April 20, 1999 and on Form SB-2 on July 7, 1999).
(b) Attached to Section 3.9 of the Disclosure Schedule is a
summary dated as of July 12, 2000, of the Accounts Receivable, which includes an
aging of all accounts and notes receivable showing amounts due in 30-day aging
categories. All Accounts Receivable represent valid obligations arising from
sales actually made or services actually performed in the ordinary course of
business. The Accounts Receivable are current and collectible net of any
respective reserves shown on Seller's and its subsidiaries books and records
(which reserves are adequate and calculated consistent with past practice).
Subject to such reserves, each of the Accounts
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Receivable is of such a character that it will be collectible in full, without
any set-off, within one hundred twenty (120) days after the day on which it
first became due and payable. There is no contest, claim, or right of set-off
under any contract with any obligor of an Account Receivable relating to the
amount or validity of such Account Receivable.
3.10 Liabilities and Obligations. Except as set forth in Section 3.10
of the Disclosure Schedule, the Purchased Assets are free and clear of all
liabilities and Liens. For purposes of this Section 3.10, the term "liabilities"
shall include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, costs of transfer,
expenses of transfer, obligation or responsibility, either accrued, absolute,
contingent, mature, unmature or otherwise and whether known or unknown, fixed or
unfixed, choate or inchoate, liquidated or unliquidated, secured or unsecured,
but not including Assumed Liabilities.
3.11 Product and Service Warranties and Guaranties. Section 3.11 of the
Disclosure Schedule sets forth a description of all the product and service
warranties or guaranties given by Seller or any of Seller's subsidiaries to any
customer in connection with the sale of its products or services, and (a) no
claims have been made or are, to the best of Seller's knowledge, threatened
under Seller's or any of its subsidiaries product or service warranties or
guaranties, other than claims under Seller's false alarm guaranties that occur
in the ordinary course of the Business consistent with past practice, (b) to
Seller's knowledge, there exists no event or circumstance, which after notice or
the passage of time of both, might create or result in liabilities or
obligations under Seller's or any of its subsidiaries product or service
warranties or guaranties in excess of the liabilities and obligations incurred
by Seller or any of its subsidiaries, on average, during the past two (2) years,
(c) there are no statements, citations or decisions by any Governmental Entity
or any product testing laboratory stating that any product of Seller or any of
its subsidiaries is unsafe or fails to meet any standards promulgated by such
Governmental Entity or testing laboratory, (d) to Seller's knowledge, there is
no design, manufacturing or other defect in any model or type of product or
product specification of Seller or any of its subsidiaries, and (e) there have
not been any mandatory or voluntary product recalls with respect to any products
of Seller or any of its subsidiaries and, to Seller's knowledge, there is no
fact relating to any product of Seller or any of its subsidiaries that may
impose a duty on Seller or any of its subsidiaries to recall any product or warn
customers of a defect in any product of Seller or any of its subsidiaries.
3.12 Material Permits. Seller owns or holds all licenses, franchises,
approvals, orders, registrations, certifications, variances, permits and other
similar governmental authorizations necessary or proper to conduct the Business
as it is currently being conducted (the "Material Permits"). The Material
Permits are valid, and Seller has not received any notice that any governmental
authority intends to modify, cancel, terminate or not renew any Material Permit.
Seller has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in the Material
Permits and other applicable orders, approvals, variances, rules and regulations
and is not in violation of any of the foregoing. A list of all Material Permits
is set forth in Section 3.12 of the Disclosure Schedule.
3.13 Environmental Matters.
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(a) Hazardous Material. Other than as set forth in Section
3.13(a) of the Disclosure Schedule, no underground storage tanks and no amount
of any substance that has been designated by any Governmental Entity or by
applicable federal, state, local, foreign, provincial, municipal, or other
applicable law pertaining to health or the environment to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the Resource Conservation and Recovery Act of 1976,
as amended, and the regulations promulgated pursuant to said laws but excluding
office and janitorial supplies properly and safely maintained (a "Hazardous
Material"), are, to Seller's knowledge, present in, on or under any real
property, including the land and the improvements, ground water and surface
water thereof, that Seller has at any time owned, operated, occupied or leased
and currently or formerly used in connection with the Business. Section 3.13(a)
of the Disclosure Schedule identifies all underground and aboveground storage
tanks, and the capacity, age, and contents of such tanks, located on property
owned or leased by Seller and currently or formerly used in connection with the
Business.
(b) Hazardous Materials Activities. With respect to the
Business, Seller has not transported, stored, used, manufactured, disposed of or
released, or exposed its employees or others to, Hazardous Materials in
violation of any law in effect on or before the Closing Date, nor has Seller
disposed of, transported, sold, or manufactured any product containing a
Hazardous Material (collectively, "Seller Hazardous Materials Activities") in
violation of any Laws and Regulations (as defined in Section 3.20) in effect
prior to or as of the date hereof.
(c) Permits. Seller currently holds all environmental Material
Permits (the "Environmental Permits") necessary for the conduct of Seller's
Hazardous Material Activities relating to or affecting the Business as these
activities and the Business are currently being conducted, except for those that
the failure to have would result in only a de minimis penalty. All Environmental
Permits are in full force and effect. Seller (i) is in compliance in all
material respects with all terms and conditions of the Environmental Permits and
(ii) is in compliance in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in all applicable Laws and Regulations
relating to health or the environment or contained in any regulation, code,
plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder. Section 3.13(c) of the Disclosure Schedule
includes a listing and description of all Environmental Permits currently held
by Seller and relating to or in any manner affecting the Business.
(d) Environmental Liabilities. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the best knowledge of Seller, threatened concerning any
Environmental Permit, Hazardous Material or any Seller Hazardous Materials
Activity. To Seller's knowledge, there are no past or present actions,
activities, circumstances, conditions, events, or incidents that could involve
Seller (or any person or entity whose liability Seller has retained or assumed,
either by contract or operation of law) in any action or claim pertaining to
health or the environment, or impose upon Seller (or any person or entity whose
liability Seller has retained or assumed, either by contract or operation of
law) any material environmental liability including, without limitation, common
law tort liability.
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3.14 Personal Property. Section 3.14 of the Disclosure Schedule sets
forth an accurate list of all of Seller's owned and leased personal property
having a value in excess of $500 and identifies which personal property is owned
and which is leased. All of the machinery and equipment of Seller listed in
Section 3.14 of the Disclosure Schedule and all leased personal property is in
good working order and condition, ordinary wear and tear excepted and subject
only to breakdowns or equipment being out of service that occur in the ordinary
course of business and not inconsistent with the historical levels of breakdowns
or equipment being out of service experienced in the conduct of the Business,
and, if leased, is in condition sufficient for return to the lessor thereof
without penalty or payment for excessive wear, poor condition or other
deficiency. All leases set forth in Section 3.14 of the Disclosure Schedule are
in full force and effect and constitute valid and binding agreements of Seller,
and Seller is not in breach of any of their respective terms. All Fixed Assets
used by Seller are either owned by Seller or leased under an agreement listed in
Section 3.14 of the Disclosure Schedule.
3.15 Customers; Assigned Contracts and Commitments.
(a) In Section 3.15(a) of the Disclosure Schedule, Seller has
delivered to Buyer a complete and accurate list of the Business' top twenty (20)
customers (in terms of percentage sales of the Business) for each of the past
two (2) fiscal years (the "Customers").
(b) Section 3.15(b) of the Disclosure Schedule contains an
accurate list of all Assigned Contracts (other than purchase orders and customer
orders) which list includes (without limitation) all contracts with Customers,
purchase or supply contracts, distributorship contracts, sales representative
contracts, non-compete agreements, assignments of rights in Intellectual
Property to third parties, consulting agreements, loan agreements, indemnity or
guaranty agreements, bonds, mortgages, options to purchase land, Liens, pledges
or other security agreements contracts that may give rise to obligations or
liabilities exceeding, during the current term thereof, $25,000, contracts that
generate revenues or income exceeding, during the current term thereof, $25,000,
contracts to which Seller and any affiliate of Seller or any officer, director
or stockholder of Seller is a party, and contracts in which Seller has granted
manufacturing rights, "most favored nation" pricing provisions, non-competition
rights or restrictions, or has agreed to purchase a minimum quantity of goods or
services, agreed to make a minimum payment or has agreed to purchase goods or
services exclusively from a certain party.
(c) Except as set forth in Section 3.15(c) of the Disclosure
Schedule, (i) none of the Customers has canceled or substantially reduced, or is
currently attempting or, to the knowledge of Seller, threatening to cancel or
substantially reduce, any purchases, (ii) Seller has complied with all of its
commitments and obligations and is not in default under any of the Assigned
Contracts (except for a default under an Assigned Contract that may occur
because of the assignment of such Assigned Contract pursuant to this Agreement
without the consent of the parties thereto), and no notice of default has been
received with respect to any thereof, and (iii) there are no Assigned Contracts
that were not negotiated at arm's length with third parties not affiliated with
Seller or any officer, director or stockholder of Seller. Prior to the date
hereof, Seller has identified for Buyer the customers of the Business that have
made deposits or prepayments on account of any Assigned Contract. Seller has no
knowledge of any pattern or series of claims against Seller or any of its
subsidiaries that reasonably could be expected to result in a generalized
product recall relating to products sold by Seller or any of its subsidiaries,
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regardless of whether such product recall is formal, informal, voluntary or
involuntary. None of the executory Assigned Contracts is a contract for the sale
of any products or services that, at the time of the contract's execution and
delivery, Seller or any of its subsidiaries knew, or could reasonably foresee,
could result in sales of products or services by Seller or any of its
subsidiaries at an aggregate loss in excess of $25,000.
(d) Except as set forth in Section 3.15 of the Disclosure
Schedule, each Assigned Contract with a Customer (i) is valid, binding,
enforceable and in full force and effect, (ii) is not subject to any default by
any party thereto and no event has occurred which with notice or lapse of time
would constitute a breach or default or permit termination, modification or
acceleration, under the written arrangement, nor is there any dispute between
the parties thereto, (iii) is assignable by Seller or its subsidiaries to Buyer
without the consent or approval of any party, and (iv) will, and to Seller's
knowledge, continue to be legal, valid, binding and enforceable and in full
force and effect immediately following the Closing in accordance with the terms
thereof as in effect prior to the Closing (except as enforceability of any
Assigned Contract may be affected because of the assignment of such Assigned
Contract pursuant to this Agreement without the consent of the parties thereto).
Listed in Section 3.15(d) of the Disclosure Schedule is a complete and accurate
list of all necessary consents, waivers and approvals of parties to any Assigned
Contracts with Customers or with non-customers of the Business that are required
in connection with any of the transactions contemplated hereby, or as are
required by any governmental agency or other third party or are advisable in
order that any such Assigned Contract remain in effect without modification
after the transactions contemplated hereby and without giving rise to any right
to termination, cancellation or acceleration or loss of any right or benefit
("Seller Third Party Consents"). Notwithstanding the preceding provisions of
this Section 3.15 but without limiting Seller's representations and warranties
that the Assigned Contracts are valid and enforceable contracts, Seller makes no
representation or warranty that any third party to an Assigned Contract will
continue to do business with Buyer following the Closing Date or that any third
party will, after the Closing, maintain with Buyer the current or historical
levels of business previously done with Seller.
3.16 Inventory. The inventory of Seller consists of raw materials and
supplies, manufactured and purchased parts, goods in process and finished goods,
demonstration and test instruments, all of which is merchantable and fit for the
purposes for which it was procured or manufactured, and none of which is
slow-moving, obsolete, damaged, or defective, subject only to the reserves for
obsolete, excess and slow moving inventories reflected on Seller's Financial
Statements. Section 3.16 of the Disclosure Schedule sets forth in complete an
accurate list of all Inventory as of the date of this Agreement, including the
book value of each such item thereof.
3.17 Insurance. Seller and its subsidiaries, as applicable, maintain
insurance with respect to the Business, and they are in compliance with all
material requirements and provisions of their insurance policies. No notice of
cancellation has been given to or received by Seller or any of its subsidiaries
with respect to any of the insurance policies, no such insurance policy has been
permitted to lapse and no such insurance policy is subject to any retroactive
rate or audit adjustment or coinsurance arrangement. Section 3.17 of the
Disclosure Schedule contains a complete and accurate list of all insurance
policies maintained by Seller and its subsidiaries.
3.18 Government Contracts.
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(a) RESERVED
(b) Seller is not currently suspended or debarred from bidding
on contracts or subcontracts for any agency or instrumentality of the United
States Government, nor, to the knowledge of Seller, has any suspension or
debarment action been threatened or commenced. Seller has not in the past been
suspended or debarred from bidding on contracts or subcontracts for any agency
or instrumentality of the United States Government.
(c) Seller has not been, nor is it now being, audited, or to
Seller's knowledge, investigated by any government agency, or the inspector
general or auditor general or similar functionary of any agency or
instrumentality, nor, to the knowledge of Seller, has such audit or
investigation been threatened.
(d) Seller has no disputes pending before a contracting
officer of, nor any current claim (other than the Accounts Receivable) pending
against, any agency or instrumentality of the United States Government.
(e) Seller has not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim, or
any other information to any agency or instrumentality of the United States
Government.
(f) To Seller's knowledge, no employee, agent, consultant,
representative, or affiliate of Seller is in receipt or possession of any
competitor or government proprietary or procurement sensitive information under
circumstances where there is reason to believe that such receipt or possession
is unlawful or unauthorized.
3.19 Litigation. Except as set forth in Section 3.19 of the Disclosure
Schedule, neither Seller nor any of its subsidiaries is a party to any suit,
claim, action, proceeding or, to Seller's knowledge, investigation before any
Governmental Entity or before any arbitrator, to the knowledge of Seller, no
suit, claim, action, proceeding or investigation has been threatened, and, to
Seller's knowledge, there is no basis for any such suit, claim, action,
proceeding or investigation. Seller and each of its subsidiaries is fully
insured against any matter listed in Section 3.19 of the Disclosure Schedule.
Neither Seller nor any of its subsidiaries is subject to any outstanding order,
writ, injunction or decree that, individually or in the aggregate could have a
material adverse effect on the Business or any of the Purchased Assets or that
could prevent or significantly delay the consummation of the transactions
contemplated by this Agreement.
3.20 Conformity with Law. Seller and each of its subsidiaries is
conducting, and has in the past conducted, the Business in compliance with all
applicable federal, state, local and foreign laws, regulations, treaties, rules,
statutes, ordinances, and orders ("Laws and Regulations"), including without
limitation the rules and regulations of the United States Occupational Safety
and Health Administration and the United States Environmental Protection Agency.
Since January 1, 1995, neither Seller nor any of its subsidiaries has received
any notice or communication from any Governmental Entity alleging noncompliance
with any applicable Laws and Regulations in connection with the operation of the
Business or the ownership of the Purchased Assets that could have a Material
Adverse Effect. Seller and each of its subsidiaries have complied, and are in
compliance, with all applicable federal and state laws governing the issuance of
securities and the governance of corporate affairs. The directors and officers
of
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Seller and each of its subsidiaries have operated, and are operating, the
Business and the corporate affairs of each of Seller and its subsidiaries, as
applicable, in compliance with their respective fiduciary duties.
3.21 Taxes.
(a) All Tax Returns (as defined below) required to be filed by
Seller or any of its subsidiaries have been filed, and all such Tax Returns are
true, correct, and complete. All Taxes owed by Seller or any of its subsidiaries
(whether or not shown on any Tax Return) have been paid in full or withheld on a
timely basis.
(b) No deficiencies for any Taxes, assessment or other
governmental charges have been asserted in writing or assessed against Seller or
any of its subsidiaries that remain unpaid. The provisions made for Taxes
(excluding reserves for deferred taxes) on the Acquisition Balance Sheet reflect
all unpaid Taxes of Seller and any of its subsidiaries or for which Seller or
any of its subsidiaries is liable, whether or not disputed. Seller or one of its
subsidiaries is entitled to any refunds shown and to the amounts indicated with
respect thereto on the Acquisition Balance Sheet. Seller has provided to the
Buyer true and complete copies of the Federal and state income Tax Returns of
Seller and its subsidiaries for the three years ended on the Balance Sheet Date,
together with true and complete copies of all reports of any taxing authority
relating to examinations thereof. Neither Seller nor any of its subsidiaries is
under audit or, to Seller's knowledge, investigation with respect to any Taxes,
and no notice has been received of the expected commencement of such an audit or
investigation. No claim has ever been made by a Governmental Entity in a
jurisdiction where Seller or any of its subsidiaries does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. Neither Seller
nor any of its subsidiaries is presently bound by any agreements extending or
waiving the statute of limitations with respect to any Taxes. Each of Seller and
its subsidiaries have withheld or otherwise collected and paid over to the
proper Governmental Entity all Taxes or amounts it was required to withhold or
collect and paid over in connection with amounts paid to any employee,
independent contractor, creditor or third party.
(c) There are (and immediately following the Closing there
will be) no Liens on the Purchased Assets relating to or attributable to Taxes,
except for Taxes not yet due and payable. Seller has no knowledge of any basis
for the assertion of any claims that, if adversely determined, would result in a
Lien on the Purchased Assets or otherwise adversely affect the Buyer or the
Purchased Assets.
(d) Neither Seller nor any of its subsidiaries is a party to a
Tax sharing or indemnity agreement with any other person.
(e) None of the Purchased Assets is "tax exempt use property"
within the meaning of section 168(h) of the Code.
(f) For purposes of this Agreement, the term "Tax Return"
means any return (including information return), report, statement, schedule,
notice, form, estimate or declaration of estimated tax relating to or required
to be filed with any Governmental Entity in connection with the determination,
assessment, collection or payment of any Tax.
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3.22 Absence of Changes. Since the Balance Sheet Date, Seller and each
of its subsidiaries has conducted the Business in the ordinary course consistent
with past custom and practice and, except as contemplated herein or as set forth
in Section 3.22 of the Disclosure Schedule, there has not been:
(a) any change that by itself or together with other changes,
has had or is likely to have a Material Adverse Effect;
(b) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of Seller;
(c) any breach, amendment or termination of any Assigned
Contract, license, permit or other right to which Seller or any if its
subsidiaries is a party which could have a Material Adverse Effect;
(d) any change in accounting methods or practices (including
any change in depreciation or amortization policies or rates) by Seller or any
of its subsidiaries or the revaluation by Seller or any of its subsidiaries of
any of the Purchased Assets;
(e) sale, assignment, transfer, license, or sublicense of any
Intellectual Property other than in the ordinary course of the Business;
(f) the commencement or notice or, to the knowledge of Seller,
threat of commencement of any lawsuit or proceeding against or investigation of
Seller or any of its subsidiaries;
(g) any agreement, amendment to any agreement, termination,
action or failure to act that would constitute a violation of or default under,
or a waiver of rights under, any Assigned Contract which could have a Material
Adverse Effect;
(h) the adoption, amendment or termination of any Business
Benefit Plan or Business Benefit Arrangement (each as defined in Section 3.30)
or the making or grant of any increase in any bonus, profit sharing, incentive,
severance or other employee benefit, plan, contract or arrangement;
(i) any incurrence of any indebtedness or any Lien upon any of
its assets, tangible or intangible;
(j) any discharge or satisfaction of any Lien;
(k) any sale, lease, transfer or assignment of any of Seller's
or its subsidiaries' assets, tangible or intangible, other than for a fair
consideration;
(l) any agreement, lease, contract or license (or series of
related agreements, leases, contracts or licenses) involving more than $30,000;
(m) any capital expenditure (or series of related capital
expenditures) involving more than $30,000;
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(n) any issuance of any note, bond or other debt security or
creation, incurrence, assumption or guaranty of any indebtedness for borrowed
money or capitalized lease obligation;
(o) any delay or postponement of the payment of any accounts
payable or other liabilities of Seller or any of its subsidiaries;
(p) RESERVED
(q) any issuance, reissuance, sale, redemption, purchase or
acquisition of any of the capital stock or other securities of Seller or any of
its subsidiaries;
(r) any declaration of any dividend or other distribution in
respect of the capital stock of Seller;
(s) any change in employment terms for any of the directors,
officers, or employees of Seller or any of its subsidiaries, or the grant of any
bonus or wage or salary increase to any director, officer, employee or group of
employees;
(t) any execution and delivery of any employment agreement or
collective bargaining agreement, written or oral, or modification of any
existing employment agreement or collective bargaining agreement;
(u) any loan or other transaction between Seller or any of its
subsidiaries and any officer, director or employee of Seller or any of its
subsidiaries; or
(v) any negotiation or agreement by Seller, any of its
subsidiaries or any officer or employee thereof not previously disclosed to
Buyer to do any of the things described in the preceding clauses (a) through (u)
(other than negotiations with Danaher Corporation, Buyer and their
representatives regarding the transactions contemplated by this Agreement).
3.23 Intellectual Property.
(a) Section 3.23(a) of the Disclosure Schedule lists, all, if
any, of Seller's and any of its subsidiaries' United States and foreign: (i)
patents, patent applications (including provisional applications); (ii)
registered trademarks, applications to register trademarks, intent-to-use
applications, or other registrations related to trademarks; (iii) registered
copyrights and applications for copyright registration; and (iv) any other
Intellectual Property of Seller that is the subject of an application,
certificate or registration filed with, issued by, or recorded by, any
Governmental Entity (all of the foregoing, the "Registered Intellectual
Property").
(b) Each item of Registered Intellectual Property is valid and
subsisting, all necessary registration, maintenance and renewal fees in
connection with such Registered Intellectual Property have been paid and all
necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign jurisdictions, as
the case may be, for the purposes of maintaining such Registered Intellectual
Property.
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(c) Except as set forth in Section 3.23(c) of the Disclosure
Schedule, no third party has been granted by Seller or any of its subsidiaries
any rights to use any of Seller's or any of its subsidiaries' Intellectual
Property.
(d) (i) Seller or one of its subsidiaries has good and
exclusive title to each item of Registered Intellectual Property listed in
Section 3.23(a) of the Disclosure Schedule, free and clear of Liens; and (ii)
Seller or one of its subsidiaries (other than Toxguard Systems, Inc.) owns, or
has the right, pursuant to a valid Assigned Contract, to use or operate under,
all other Intellectual Property of Seller or any of its subsidiaries.
(e) To the Company's knowledge, the operation of the Business
as it is currently conducted does not infringe or misappropriate the
Intellectual Property of any third party, violate the rights of any third party
(including rights to privacy or publicity), or constitute unfair competition nor
has Seller or any of its subsidiaries received notice from any third party
claims that such operations constitutes any such infringement, misappropriation,
violation or unfair competition.
(f) Seller or one of its subsidiaries (other than Toxguard
Systems, Inc.) owns or has the right to all Intellectual Property necessary to
the conduct of the Business as it is currently conducted.
(g) There are no Assigned Contracts with respect to
Intellectual Property under which there is any dispute regarding the scope of
such agreement, or performance under such agreement including with respect to
any payments to be made or received by Seller or any of its subsidiaries
thereunder.
(h) To Seller's knowledge, no third party is infringing or
misappropriating any of Seller's or any of its subsidiaries' Intellectual
Property.
(i) No Intellectual Property of Seller or any of its
subsidiaries or product or service of Seller or any of its subsidiaries is
subject to any outstanding decree, order, judgment or stipulation restricting in
any manner the licensing or use thereof by Seller or any of its subsidiaries.
3.24 Suppliers. None of the suppliers of Seller or any of its
subsidiaries is the sole available source of such supply.
3.25 Real Property. Neither Seller nor any of its subsidiaries owns or
has ever owned any real property. Section 3.25 of the Disclosure Schedule lists
and describes briefly all real property leased or subleased to Seller or any of
its subsidiaries. Seller has delivered to the Buyer correct and complete copies
of the leases and subleases listed in Section 3.25 of the Disclosure Schedule.
With respect to each lease and sublease listed in Section 3.25 of the Disclosure
Schedule:
(i) the lease or sublease is legal, valid, binding,
enforceable against Seller and, to Seller's knowledge, the other party thereto,
and in full force and effect and will continue
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to be legal, valid, binding, enforceable, and in full force and effect on
identical terms throughout the Transition Period;
(ii) no event (whether a default or breach by any party, a
repudiation, dispute, transfer, failure to obtain a government approval or
failure of the owner's title) has occurred under any lease or sublease that
could require Buyer to vacate the premises; and
(iii) all leased premises are supplied with utilities and
other services necessary for the operation of the Business on such premises as
currently conducted.
(iv) each lease or sublease was entered into in an arm's
length transaction between unrelated parties;
(v) to Seller's knowledge, there exists no default or
condition that, with the giving of notice or the passage of time or both, could
become a default under any lease or sublease;
(vi) the leased premises and all plants, buildings, and
improvements located thereon conform to all applicable building, zoning and
other laws, ordinances, rules and regulations;
(vii) there exists no violation of any covenant, condition,
restriction, easement, agreement or order affecting any portion of any of the
leased premises;
(viii) all improvements located on any of the leased premises
have direct access to a public road adjoining such premises;
(ix) to Seller's knowledge, no improvements or access ways
encroach on land not included in the leased premises and no such improvement is
dependent for its access or operation on any land, building or other improvement
not included in the leased premises; and
(x) neither Seller nor any of its subsidiaries is obligated
under any Assigned Contract to purchase any of the leased premises.
3.26 Title to Purchased Assets.
(a) Seller or any of its subsidiaries is the true and lawful
owner of, and has good title to, all of the Purchased Assets, free and clear of
all Liens.
(b) Upon execution and delivery by Seller to Buyer of the
instruments of conveyance referred to in Section 2.2(a), Buyer will become the
true and lawful owner of, and will receive good title to, the Purchased Assets,
free and clear of all Liens.
(c) The Purchased Assets are sufficient to permit Seller and
its subsidiaries to conduct the Business as presently conducted. The Fixed
Assets set forth in Section 1.1(a)(iv) of the Disclosure Schedule comprise all
of the machinery, equipment, tools and tooling, fixtures and testing equipment
used in connection with the Business.
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(d) Section 3.26 of the Disclosure Schedule lists all assets
of Seller or any of its subsidiaries used in the ordinary course of business at
any time since January 1, 1998 which are not Purchased Assets. None of the
Purchased Assets constitutes a fixture, and the removal thereof will not
constitute a default or trigger any additional liability under any lease or
sublease to which Seller or any of its subsidiaries is a party.
3.27 Year 2000 Compliance. All computer network, data processing
hardware, software systems and technology (including communication hardware and
software) ("Computer Systems") owned, used or relied on in the conduct of the
Business are Year 2000 Compliant. All of Seller's and its subsidiaries' products
(including products currently under development) and services (i) record, store,
process, calculate and present calendar dates falling on and after (and if
applicable, spans of time including) January 1, 2000, and calculate any
information dependent on or relating to such dates in the same manner, and with
the same functionality, data integrity and performance, as the products or
services record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates; (ii) have lost no functionality with respect to the introduction
of records containing dates falling on or after January 1, 2000; and (iii) are
interoperable with other products used and distributed by the Company that may
reasonably deliver records to Seller's or any of its subsidiaries' products or
services or receive records from Seller's or any of its subsidiaries' products
or services, or interact with Seller's or any of its subsidiaries' products or
services, including without limitation back-up and archived data. "Year 2000
Compliant" means that all of the Computer Systems correctly recognize,
manipulate and process (including calculating, comparing and sequencing) date
information relating to dates on or after January 1, 2000 (including leap year
calculations) have done so and shall continue to do so, and that the operation
and functionality of such Computer Systems were not, and will not be, adversely
affected by the advent of the Year 2000 or any manipulation of data featuring
date information relating to dates before, on or after January 1, 2000.
3.28 Powers of Attorney. To Seller's knowledge, there are no
outstanding powers of attorney executed on behalf of Seller or any of its
subsidiaries relating to the Purchased Assets or the Business.
3.29 Brokers' Fees. Neither Seller nor any of its subsidiaries has any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
3.30 Employee Benefit Plans.
(a) Definitions.
(i) "Benefit Arrangement" means any benefit
arrangement, obligation, or practice, whether or not legally enforceable, to
provide benefits (other than merely as salary or under a Benefit Plan), as
compensation for services rendered, to present or former directors, employees,
agents, or independent contractors, including, but not limited to, employment or
consulting agreements, severance agreements or pay policies, stay or retention
bonuses or compensation, executive or incentive compensation programs or
arrangements, sick leave, vacation pay, plant closing benefits, salary
continuation for disability, workers' compensation,
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retirement, deferred compensation, bonus, stock option or purchase plans or
programs, tuition reimbursement or scholarship programs, employee discount
programs, meals, travel, or vehicle allowances, any plans subject to Code
Section 125, and any plans providing benefits or payments in the event of a
change of control, change in ownership or effective control or sale of a
substantial portion (including all or substantially all) of the assets of any
business or portion thereof, in each case with respect to any present or former
employees, directors, or agents.
(ii) "Benefit Plan" has the meaning given in ERISA
Section 3(3), together with plans or arrangements that would be so defined if
they were not (i) otherwise exempt from ERISA by that or another section, (ii)
maintained outside the United States, or (iii) individually negotiated or
applicable only to one person.
(iii) "ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and all regulations and rules issued
thereunder, or any successor law.
(iv) "ERISA Affiliate" means any person or entity
that, together with a Related Company, would be or was at any time treated as a
single employer under Code Section 414 or ERISA Section 4001 and any general
partnership of which a Related Company is or has been a general partner.
(v) "Multiemployer Plan" means any Benefit Plan
described in ERISA Section 3(37).
(vi) "Pension Plan" means any Benefit Plan subject to
Code Section 412 or ERISA Section 302 or Title IV (including any Multiemployer
Plan) or any comparable plan not covered by ERISA.
(vii) "Qualified Plan" means any Benefit Plan
intended to meet the requirements of Code Section 401(a), including any already
terminated plan.
(viii) "Related Company" means Seller and its
subsidiaries.
(ix) "Seller Benefit Arrangement" means any Benefit
Arrangement any Related Company sponsors or maintains or with respect to which
any Related Company has or may have any current or future liability (whether
actual, contingent, with respect to any of its assets or otherwise), in each
case with respect to any present or former directors, officers, or employees of
or service providers to the Related Companies.
(x) "Seller Plan" means any Benefit Plan that any
Related Company maintains or has previously maintained or to which any Related
Company is obligated to make payments or has or may have any liability, in each
case with respect to any present or former employees of any Related Company.
(b) Section 3.30(b) of the Disclosure Schedule contains a
complete and accurate list of all Seller Plans and Seller Benefit Arrangements.
(c) With respect, as applicable, to Benefit Plans and Benefit
Arrangements:
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(i) Seller has delivered true, correct, and complete
copies of the following documents with respect to each Seller Plan and Seller
Benefit Arrangement, to the extent applicable, to the Buyer: (A) all plan or
arrangement documents, including but not limited to, trust agreements, insurance
policies, service agreements and formal and informal amendments to each; (B) the
most recent Forms 5500 or 5500C/R and any attached financial statements and
those for the prior three years and any related actuarial reports; (C) the last
Internal Revenue Service ("IRS") determination or opinion letter, the last IRS
determination or opinion letter that covered the qualification of the entire
plan (if different), and the materials submitted to obtain those letters; (D)
summary plan descriptions, summaries of material modifications, any prospectuses
that describe the Seller Plans or Seller Benefit Arrangements, and Statement of
Financial Accounting Standards Nos. 87, 106, and 112 reports; (E) the most
recent written descriptions of all non-written agreements relating to any such
plan or arrangement; (F) all reports received within the three years preceding
the date of this Agreement by third-party administrators, actuaries, investment
managers, consultants, or other independent contractors (other than individual
account records or participant statements) or prepared by employees of the
Company or its ERISA Affiliates; (G) all notices the Internal Revenue Service,
Department of Labor, or any other governmental agency or entity issued to the
Company within the four years preceding the date of this Agreement; (H) employee
manuals or handbooks containing personnel or employee relations policies; and
(I) any other documents Buyer has requested;
(ii) The only Qualified Plan currently in operation
is the Ustman Industries Inc. 401(k) Plan. No Related Company has maintained or
contributed to another Qualified Plan. The Qualified Plans qualify under Code
Section 401(a), and nothing has occurred with respect to the operation of any
Qualified Plans that could cause the loss of such qualification or exemption or
the imposition of any liability, Lien, penalty or tax under ERISA or the Code;
each Seller Plan and each Seller Benefit Arrangement has been maintained in
accordance with its constituent documents and with all applicable provisions of
domestic and foreign laws, including federal and state securities laws and any
reporting and disclosure requirements; with respect to each Seller Plan, no
transactions prohibited by Code Section 4975 or ERISA Section 406 and no
breaches of fiduciary duty described in ERISA Section 404 have occurred; and no
Seller Plan contains any security issued by any Related Company.
(iii) No Related Company and no ERISA Affiliate has
ever sponsored or maintained or had any liability (whether actual or contingent)
with respect to any Pension Plan, whether maintained by it or a predecessor
entity; the Related Companies have no liability (whether actual or contingent)
with respect to any Benefit Plan or Benefit Arrangement other than the Seller
Plans and Seller Benefit Arrangement or with respect to any Benefit Plan
maintained, now or in the past (or that should have been maintained), by any
ERISA Affiliate or predecessor;
(iv) With respect to each Pension Plan, (I) no
Related Company and no ERISA Affiliate has terminated or withdrawn or sought a
funding waiver, and no facts exist that could reasonably be expected to cause
such actions; (II) no accumulated funding deficiency (under Code Section 412 and
without regard to waivers) exists or has existed; (III) no reportable event (as
defined in ERISA Section 4043) has occurred; (IV) all costs have been provided
for on the basis of consistent methods in accordance with sound actuarial
assumptions and practices; (V) the assets, as of its last valuation date,
exceeded its "Benefit Liabilities" (as defined
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in ERISA Section 4001(a)(16)); and (VI) since the last valuation date, there
have been no amendments or changes to increase the amounts of benefits and, to
the knowledge of Seller, nothing has occurred that would reduce the excess of
assets over benefit liabilities in such plans;
(v) There are no pending claims (other than routine
benefit claims) or lawsuits that have been asserted or instituted by, against,
or relating to, any Seller Plans or Seller Benefit Arrangements, nor is there
any basis for any such claim or lawsuit. No Seller Plans or Seller Benefit
Arrangements are or have been under audit or examination (nor has notice been
received of a potential audit or examination) by any domestic or foreign
governmental agency or entity (including the IRS and Department of Labor); and
no matters are pending under the IRS's Employee Plans Compliance Resolutions
System or any successor or predecessor program;
(vi) No Seller Plan or Seller Benefit Arrangement
contains any provision or is subject to any law that would accelerate or vest
any benefit or require severance, termination or other payments or trigger any
liabilities as a result of the transactions this Agreement contemplates; no
Related Company has declared or paid any bonus or incentive compensation related
to the transactions this Agreement contemplates; and no payments under any
Seller Plan or Seller Benefit Arrangement would, individually or collectively,
be nondeductible under Code Section 280G;
(vii) Each Related Company has paid all amounts it is
required to pay as contributions to the Seller Plans as of the Balance Sheet
Date; all benefits accrued under any unfunded Seller Plan or Seller Benefit
Arrangement will have been paid, accrued, or otherwise adequately reserved in
accordance with GAAP as of the Balance Sheet Date; all monies withheld from
employee paychecks for Seller Plans have been transferred to the relevant plan
within the time applicable regulations specify;
(viii) All group health plans of the Related
Companies and their ERISA Affiliates materially comply with the requirements of
Part 6 of Title I of ERISA ("COBRA"), Code Section 5000, and the Health
Insurance Portability and Accountability Act; no Related Company has any
liability under or with respect to COBRA for its own actions or omissions or
those of any predecessor; no employee or former employee (or beneficiary of
either) of any Related Company is entitled to receive any benefits, including,
without limitation, death or medical benefits (whether or not insured) beyond
retirement or other termination of employment, other than as applicable law
requires; and
(ix) Seller has fully reserved on the Seller
Financial Statements for any payments due to Watson.
(d) Section 3.30(d) of the Disclosure Schedule sets forth an
accurate list, as of the date hereof, of all employees of the Business who
earned more than $50,000 in 1999 or who may earn more than $50,000 in 2000, all
officers and all directors, and all employment agreements with such employees,
officers, and directors and the rate of compensation (and the portions thereof
attributable to salary, bonus, and other compensation respectively) of each such
person as of (i) the Balance Sheet Date and (ii) the date of this Agreement. The
schedule also shows totals accrued for vacation, sick leave, and incentive
bonuses for all employees.
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3.31 Labor and Employment Matters. With respect to employees of and
services providers to the Business:
(a) Each Related Company complies and has complied with all
applicable domestic and foreign laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation any such laws respecting employment discrimination, workers'
compensation, family and medical leave, the Immigration Reform and Control Act,
and occupational safety and health requirements, and no claims or investigations
are pending or, to the knowledge of Seller, threatened with respect to such
laws, either by private individuals or by governmental agencies; and all
employees are at-will;
(b) No Related Company is nor has it been engaged in any
unfair labor practice, and there is not now, nor within the past three years has
there been, any unfair labor practice complaint against any Related Company
pending or, to the knowledge of Seller, threatened, before the National Labor
Relations Board or any other comparable foreign or domestic authority or any
workers' council;
(c) No labor union represents or has ever represented any
Related Company's employees and no collective bargaining agreement is or has
been binding against any Related Company. No grievance or arbitration proceeding
arising out of or under collective bargaining agreements or employment
relationships is pending, and no claims therefore exist or have, to the
knowledge of Seller, been threatened; no labor strike, lock-out, slowdown, or
work stoppage is or has ever been pending or threatened against or directly
affecting any Related Company; and
(d) All persons who are or were performing services for the
Business and are or were classified as independent contractors do or did satisfy
and have satisfied the requirements of law to be so classified, and the
appropriate Related Company has fully and accurately reported their compensation
on IRS Forms 1099 when required to do so.
3.32 Disclosure. All written agreements, lists, schedules, instruments,
exhibits, documents, certificates, reports, statements and other writings
furnished to Buyer pursuant hereto or in connection with this Agreement or the
transactions contemplated hereby, are and will be complete and accurate in all
material respects. No representation or warranty by Seller contained in this
Agreement, in the schedules attached hereto or in any certificate furnished or
to be furnished by Seller to Buyer in connection herewith or pursuant hereto
contains or will contain any untrue statement of a material fact or omits or
will omit to state any material fact necessary in order to make any statement
contained herein or therein not misleading.
3.33 SEC Reports. Seller has filed with the SEC all forms, reports,
schedules, registration statements and definitive proxy statements required to
be filed by Seller with the SEC since January 1, 1997 (as they have been amended
since the time of their filing, and including any documents filed as exhibits
thereto, collectively (the "SEC Reports")) and has heretofore made available to
Buyer complete and correct copies of all such forms, reports, schedules,
registration statements, and proxy statements. As of their respective dates, the
SEC Reports (including but not limited to any financial statements or schedules
included or incorporated by reference therein) complied in all material respects
with the requirements of the
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Securities Exchange Act of 1934, as amended (the "Exchange Act"), or the
Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations of the SEC promulgated thereunder applicable, as the case may be, to
such SEC Reports, and none of the SEC Reports contained or contains any untrue
statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
3.34 Information. None of the information supplied by Seller
specifically for inclusion or incorporated by reference in (i) any document to
be filed with the SEC or any other Governmental Entity in connection with the
transactions contemplated by this Agreement will, at the respective times filed
with the SEC or other Governmental Entity and, in addition, in the case of the
Information Statement, at the date it or any amendment or supplement is mailed
to stockholders, at the time of the Special Meeting and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading. The Information Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder, except that no representation is made by Seller with respect to
statements made therein based on information supplied by Buyer or Seller in
writing specifically for inclusion in the Information Statement.
3.35 Opinion of Financial Advisor. Seller has received from H.C.
Wainwright & Co., Inc. an opinion dated as of the date of this Agreement to the
effect that the consideration to be received for the Purchased Assets by the
Seller is fair from a financial point of view to the stockholders of Seller.
Seller has previously delivered to Buyer a copy of such opinion.
3.36 Voting Support Agreement and Irrevocable Proxy. Seller has
received from Sagaponack a duly executed voting support agreement substantially
in the form attached hereto as Exhibit C (the "Voting Support Agreement") by
which Sagaponack has (a) given its agreement and commitment to execute and
deliver to Seller and Buyer a written consent of shareholders of Seller
approving the transactions contemplated by this Agreement and (b) granted to
Buyer an irrevocable proxy to vote the shares of common stock of Seller held by
Sagaponack in favor of approving and adopting this Agreement at any meeting of
the stockholders of Seller at which approval of the transactions contemplated by
this Agreement is requested or any continuation thereof after an adjournment or
at any other meeting of the stockholders of Seller held on or before six months
after the date of this Agreement.
4. REPRESENTATIONS OF BUYER.
To induce Seller to enter into this Agreement and consummate the
transactions contemplated hereby, Buyer represents and warrants to Seller as
follows:
4.1 Due Organization. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and is
duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on their
respective businesses in the places and in the manner as now conducted.
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4.2 Authorization; Validity of Obligations. Buyer and the
representatives of Buyer executing this Agreement have all requisite corporate
power and authority to enter into and bind Buyer to the terms of this Agreement,
Buyer has the full legal right, power and corporate authority to enter into this
Agreement and the transactions contemplated hereby. The execution and delivery
of this Agreement by Buyer and the performance by Buyer of the transactions
contemplated herein have been duly and validly authorized by the Board of
Directors of Buyer, and this Agreement has been duly and validly authorized by
all necessary corporate action. This Agreement is a legal, valid and binding
obligation of Buyer enforceable in accordance with its terms.
4.3 No Conflicts. The execution, delivery and performance of this
Agreement, the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of any
of the Articles of Incorporation, Bylaws or any resolution of the Board of
Directors of Buyer;
(b) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, Security Interest or other arrangement to which the Buyer is a
party or by which the Buyer is bound or is subject;
(c) result in the creation or imposition of any Lien on any of
Buyer's properties, pursuant to (i) any law or regulation to which Buyer or any
of its property is subject, or (ii) any judgment, litigation, order or decree to
which Buyer is bound or any of its property is subject;
(c) result in termination or any impairment of any material
permit, franchise, license, contractual right or other authorization of Buyer;
(d) violate any constitution, statute, law, rule, regulation,
ordinance, injunction, ruling, charge, decree, order, judgment, or other
restriction of any Governmental Entity to which Buyer is subject or by which
Buyer is bound.
(e) require the Buyer to file with or to obtain the
permission, authorization, consent or approval of any Governmental Entity or
give any Governmental Entity the right to challenge any of the transactions
contemplated by this Agreement.
4.4 Broker's Fees. The Buyer has no liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.
5. COVENANTS
5.1 Access to Information.
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(a) Between the date of this Agreement and the Closing, Seller
will, and will cause its subsidiaries to, afford to Buyer and its officers,
employees, counsel, advisers and representatives, as Buyer may from time to time
reasonably request, full access to (i) all of the sites, properties, books and
records of Seller and its subsidiaries and (ii) such additional financial and
operating data and other information about Seller and any of its subsidiaries,
including without limitation, full access to Seller's and each of its
subsidiaries' employees, customers, vendors, suppliers and creditors for due
diligence inquiry. Seller will cooperate with Buyer, its representatives,
auditors and counsel in the preparation of any documents or other material which
may be required in connection with this Agreement. Buyer may, prior to the
Closing, through its own representatives, make such investigations of the
properties and plant included in the Purchased Assets and the operations of the
Business and such investigations of the financial condition of Seller for such
purposes as it deems necessary or advisable in connection with the transactions
contemplated hereby, including but not limited to enabling it to familiarize
itself and any prospective sources of financing with such properties, plants,
operations and financial conditions; provided that such investigations do not
unreasonably interfere with the normal business operations of the systems. No
information or knowledge obtained in any investigation pursuant to this Section
5.1 shall affect or be deemed to modify any representation or warranty contained
in this Agreement or the conditions to the obligations of the parties to
consummate the transactions contemplated hereby.
(b) Buyer recognizes and acknowledges that it had in the past,
currently has, and in the future may possibly have, access to certain
confidential information of Seller that are valuable, special and unique assets
of the Business. Buyer agrees that, unless there is a Closing, it will not use
or disclose confidential information with respect to Seller to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever
except in connection with the completion of the transactions contemplated by
this Agreement, unless (i) such information becomes known to the public
generally through no fault of Buyer, (ii) disclosure is required by law or the
order of any governmental authority under color of law, or (iii) the disclosing
party reasonably believes that such disclosure is required in connection with
the defense of a lawsuit against the disclosing party, provided, that prior to
disclosing any information pursuant to clause (i), (ii) or (iii) above, Buyer
shall give prior written notice thereof to Seller and provide Seller with the
opportunity to contest such disclosure and shall cooperate with efforts to
prevent such disclosure.
5.2 Conduct of Business Pending Closing. Between the date
hereof and the Closing Date, Seller and each of its subsidiaries (except as
requested or agreed by Buyer) will:
(a) carry on its Business in substantially the same manner as
it has heretofore been conducted;
(b) maintain its properties and facilities in as good working
order and condition as at present, ordinary wear and tear excepted;
(c) perform all of its obligations under agreements relating
to or affecting its assets, properties or rights;
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(d) keep in full force and effect present insurance policies
or other comparable insurance coverage; and
(e) use all commercially reasonable efforts to maintain and
preserve its business organization intact, retain its present officers and key
employees and maintain its relationships with suppliers, vendors, customers,
creditors and others having business relations with it.
5.3 Prohibited Activities. Between the date hereof and the
Closing Date, Seller and each of its subsidiaries will not, without the prior
written consent of Buyer:
(a) enter into any contract or commitment or incur or agree to
incur any liability or make any capital expenditures, or guarantee any
indebtedness, except in the ordinary course of business and consistent with past
practice in an amount in excess of $5,000;
(b) acquire, sell, assign, lease, pledge or otherwise transfer
or dispose of any assets, tangible or intangible, or securities except pursuant
to existing contracts or commitments or the sale or purchase of goods in the
ordinary course of business consistent with past custom and practice;
(c) acquire or negotiate for the acquisition of (by merger,
consolidation, purchase of a substantial portion of assets or otherwise) any
business or the start-up of any new business, or otherwise acquire or agree to
acquire any assets, except in the ordinary course of business;
(d) merge or consolidate or agree to merge or consolidate with
or into any other corporation;
(e) other than in the ordinary course of business consistent
with past custom and practice (i) modify, amend or terminate any contract or
Material Permit, (ii) waive, release, relinquish or assign any contract (or any
of Seller's or any of its subsidiaries' rights thereunder), or (iii) cancel or
forgive any indebtedness owed to Seller or any of its subsidiaries;
(f) commit a breach of any Assigned Contract, Material Permit,
or license;
(g) enter into any other transaction that is (i) not
negotiated at arm's length with a third party not affiliated with Seller or any
officer, director or stockholder of Seller (ii) outside the ordinary course of
business consistent with past practice, or (iii) prohibited hereunder;
(h) commence a lawsuit other than for routine collection of
bills;
(i) revalue any of the assets of Seller or any of its
subsidiaries, including without limitation, writing down the value of inventory
or writing off notes or accounts receivable, other than in the ordinary course
of business consistent with past practice;
(j) adopt, amend or terminate any Business Benefit Plan or
Business Benefit Arrangement; or
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(k) adopt any amendment to the Articles of Incorporation or
Bylaws of Seller or any of its subsidiaries;
(l) issue, sell, reissue, redeem, purchase or acquire any
capital stock or other securities of Seller or any of its subsidiaries;
(m) declare, set aside or pay any dividend or other
distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its capital stock;
(n) settle or compromise any suit or claim or threatened suit
or claim where the amount involved is greater than $15,000;
(o) make any tax election not required by law or settle or
compromise any tax liability;
(p) permit any insurance policy naming it as beneficiary or a
loss payable payee to be canceled or terminated without notice to Buyer, except
in the ordinary course of business consistent with past practice;
(q) except as may be required as a result of a change in law
or in GAAP, make any change in its methods of accounting, including tax
accounting policies and procedures;
(r) declare or pay, or agree to declare or pay, any bonus to,
or increase the compensation of, any officer, director, employee or group of
employees of Seller or any of its subsidiaries other than stay bonuses or
bonuses in connection with the transactions contemplated herein that be the
obligation of Seller to pay at or prior to Closing; or
(s) take, or agree (in writing or otherwise) to take, any of
the actions described in Sections 5.3(a) through (r) above, or any action that
would make any of the representations and warranties of Seller contained in this
Agreement untrue or result in any of the conditions set forth in Articles 6 and
7 not being satisfied.
5.4 Exclusivity. Seller shall not, and it shall instruct its
subsidiaries, and their respective officers, directors, employees,
representatives, agents not to, directly or indirectly, for or on its behalf (i)
initiate, solicit or encourage any inquiries or proposals that constitute, or
could reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, or business combination of Seller or any of its subsidiaries, or
the sale of assets representing a substantial portion of the assets of Seller
and its subsidiaries, taken as a whole, or the sale of shares of capital stock
of Seller or any of its subsidiaries subsidiary, including, without limitation,
by way of a tender offer or exchange offer by any Person (any of the foregoing
inquiries or proposals being referred to in this Agreement as an "Acquisition
Proposal"), (ii) engage in negotiations or discussions concerning, or provide to
any Person or entity any Confidential Information or data relating to Seller or
any of its subsidiaries for the purposes of, or otherwise cooperate with or
assist or participate in, facilitate or encourage, any inquiries or the making
of any Acquisition Proposal, (iii) agree to, approve or recommend any
Acquisition Proposal, or (iv) take any other action inconsistent with the
obligations and commitments assumed by Buyer pursuant to this Section 5.4
provided, however, that nothing contained in this Agreement shall prevent Seller
or
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its Board of Directors from furnishing Confidential Information to, or entering
into discussions or negotiations with, any person or entity in connection with
an unsolicited bona fide written Acquisition Proposal to Seller or its
stockholders, if and only to the extent that (1) the Board of Directors of
Seller determines in good faith (after consultation with outside legal counsel)
that such action is required for such Board of Directors to comply with its
fiduciary duties to stockholders under applicable law, and (2) prior to
furnishing such Confidential Information to, or entering into discussions or
negotiations with, such person or entity, Seller receives from such person or
entity an executed confidentiality agreement. Seller and its Representatives
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations by Seller, its subsidiaries, or any of their
respective officers, directors, employees, representatives or agents with any
parties conducted heretofore with respect to any of the foregoing. Seller shall
(i) promptly notify Buyer in writing after receipt by Seller or any of its
subsidiaries or their respective officers, directors, employees, representative
or agents of any Acquisition Proposal or any inquiries indicating that any
Person is considering making or wishes to make an Acquisition Proposal, which
notification shall be in writing and shall contain the principle financial terms
of any such Acquisition Proposal, and (ii) promptly notify Buyer in writing
after receipt of any request for Confidential Information relating to it or any
of its subsidiaries or for access to its or any of its subsidiaries' properties,
books or records by any person that may be considering making, or has made, an
Acquisition Proposal.
5.5 Cooperation in Obtaining Required Consents and Approvals. Each
party hereto shall cooperate in obtaining all consents and approvals required by
Section 6.4 (which shall nonetheless continue to be the responsibility of
Seller), including without limitation Seller Third Party Consents set forth in
Section 3.15(d) of the Disclosure Schedule, and Section 7.3 (which shall
nonetheless continue to be the responsibility of Buyer).
5.6 Non-Competition Agreements Binding Employees of Seller or any of
its Subsidiaries. Seller agrees to release, and shall cause each of its
subsidiaries to release, and hereby does release the provisions of any
restrictive covenants, or non-competition agreements binding on any employee of
Seller or any of its subsidiaries if such employee is offered employment by
Buyer or any company affiliated with Buyer. Seller covenants and agrees that it
will not, and shall cause its subsidiaries to not, release its employees from
and shall enforce any restrictive covenant or non-competition agreement binding
on its employees if such employees seek employment or become employed by any
business that competes with Buyer or any of its subsidiaries in the conduct of a
business similar to the Business.
5.7 Sharing of Data. Seller shall have the right for a period of seven
years following the Closing Date to have reasonable access to such books,
records and accounts, including financial and Tax information, correspondence,
production records, employment records and other records, if any, that are
transferred to Buyer pursuant to the terms of this Agreement for the limited
purposes of concluding its involvement in the business and operation of Seller
as conducted by Seller prior to the Closing Date and for complying with its
obligations under applicable securities, Tax, environmental, employment or other
laws and regulations. Buyer shall have the right for a period of seven years
following the Closing Date to have reasonable access to those books, records and
accounts, including financial and Tax information, correspondence, production
records, employment records and other records that are retained by Seller
pursuant to the terms of this Agreement in each case only to the extent that any
of the
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foregoing is needed by the Buyer in order to comply with its obligations under
applicable securities, Tax, environmental, employment or other laws and
regulations.
5.8 Cooperation in Litigation. From and after the Closing Date, each
party hereto shall fully cooperate with the other in the defense or prosecution
of any litigation or examination, audit, or other proceeding already instituted
or which may be instituted hereafter against or by such other party relating to
or arising out of the conduct of the Business prior to or after the Closing Date
(other than litigation among the parties and/or their respective Affiliates
arising out of the transactions contemplated by this Agreement or the Ancillary
Agreements). The party requesting such cooperation shall pay the reasonable
out-of-pocket expenses incurred in providing such cooperation (including legal
fees and disbursements) by the party providing such cooperation and by its
officers, directors, employees and agents, but shall not be responsible for
reimbursing such party or its officers, directors, employees and agents, for
their time spent in such cooperation.
5.9 Contracts in Progress. Seller shall forward promptly to Buyer any
monies, checks or instruments received by Seller after the Closing Date with
respect to the Contracts in Progress and any monies, checks or instruments
received by Seller after the Closing Date with respect to Accounts Receivable.
5.10 Securities Requirements.
(a) As soon as practicable following the date of this
Agreement, Seller shall file with the SEC under the Exchange Act, and shall use
commercially reasonable efforts to have cleared by the SEC, an information
statement (such information statement as amended or supplemented from time to
time being the "Information Statement") or a proxy statement (such proxy
statement as amended or supplemented from time to time being the "Proxy
Statement") relating to the transactions contemplated by this Agreement. The
Information Statement or Proxy Statement, as applicable, shall be true and
correct in all material respects and shall not omit to state any material fact
necessary in order to make the information contained therein not misleading, in
each case as of the date of the Information Statement or Proxy Statement, as
applicable. The Information Statement or Proxy Statement, as applicable, shall
comply in all material respects with the Exchange Act and the rules and
regulations thereunder. The Information Statement or Proxy Statement, as
applicable, shall not, at the time the Information Statement (or any amendment
or supplement thereto) or Proxy Statement (or any amendment or supplement
thereto), as applicable, is filed in final form with the SEC or first sent to
the stockholders of Seller, at the time of the execution and delivery of a
written consent of the shareholders of Seller or at a meeting of the
shareholders of Seller (and the date of any adjournment thereof), as applicable,
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statement made
therein, in light of the circumstances under which they are made, not
misleading, except that no representation or warranty is being made by Seller
with respect to any information supplied to Seller by Buyer or any affiliate of
Buyer specifically for inclusion in the Information Statement or Proxy
Statement, as applicable. Prior to the filing or distribution of the Information
Statement or Proxy Statement, as applicable, or any other filing with any
federal or state agency relating hereto, Seller shall give Buyer and its counsel
an opportunity to review and comment upon such documents. As soon as
practicable, but in any event within seven (7) days, after the
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SEC has cleared the Information Statement or Proxy Statement, as applicable, for
mailing to stockholders, Seller shall mail the Information Statement or Proxy
Statement, as applicable, and exhibits thereto to its stockholders, noticing
that a written consent of a majority of the stockholders of Seller has been
executed and delivered that approves the transactions contemplated by this
Agreement or noticing a meeting not more than sixty (60) days from the date of
the mailing, as applicable. Subject to the last sentence of Section 5.10(b), the
Proxy Statement, if one is to be delivered to the shareholders of Seller, shall
include the recommendation of Seller's board of directors to vote in favor of
approving and adopting this Agreement.
(b) As applicable under the circumstances and depending upon
whether Seller will seek to obtain the written consent of the shareholders of
Seller approving the transactions contemplated by this Agreement or the approval
of the stockholders of Seller of the transactions contemplated by this Agreement
at a meeting of Seller's stockholder, promptly after the date of this Agreement,
Seller will take all action necessary under California law and the Charter
Documents either (i) to obtain the written consent of its stockholders to
approve this Agreement (the "Seller Stockholders Approval") or (ii) to convene a
meeting of its stockholders to approve this Agreement (the "Seller Stockholders
Meeting"). If Seller is filing an Information Statement and is seeking the
Seller Stockholders Approval, Seller's Board of Directors shall recommend that
Seller's shareholders approve and adopt this Agreement, and shall cause Seller
to use all reasonable efforts to solicit the written approval of this Agreement
and the transactions contemplated hereunder from the stockholders unless (1)
such recommendation would not be consistent with the fiduciary duties of the
Board of Directors under applicable law, as advised in writing by outside
counsel, a copy of which opinion shall be promptly delivered to Buyer, or (2)
this Agreement is terminated in accordance with Section 10.1. If Seller is
filing a Proxy Statement and intends to hold the Seller Stockholders Meeting,
Seller will not postpone or adjourn (other than for absence of a quorum) the
Seller Stockholders Meeting without the consent of Buyer unless (i) the failure
to implement such a postponement or adjournment would be inconsistent with the
fiduciary duties of the Board of Directors of Seller under applicable law, as
advised in writing by outside counsel, a copy of which opinion shall be provided
promptly to Buyer, or (ii) this Agreement is terminated in accordance with
Section 10.1. Seller's Board of Directors shall recommend that Seller's
shareholders approve and adopt this Agreement, and shall cause Seller to use all
reasonable efforts to solicit from the stockholders proxies to vote therefor,
unless (1) such recommendation would not be consistent with the fiduciary duties
of the Board of Directors under applicable law, as advised in writing by outside
counsel, a copy of which opinion shall be promptly delivered to Buyer, or (2)
this Agreement is terminated in accordance with Section 10.1.
5.11 Tax Matters.
(a) Seller shall timely pay all Taxes of Seller and its
subsidiaries for all periods, including, without limitation, all Taxes that
relate to the Purchased Assets or the Business and that were incurred in or are
attributable to any taxable period (or portion thereof) ending on or before the
Closing Date and are not shown on the Closing Date Balance Sheet.
(b) Seller shall prepare and file all Tax Returns for the
Business for all periods ending on or before the Closing Date. Such returns will
be prepared and filed in accordance
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with applicable Law and in a manner consistent with past practices.
(c) Any real property, personal property and other similar
Taxes levied with respect to the Purchased Assets or the Business for a taxable
period that includes but does not end on the Closing Date shall be apportioned
between Seller and Buyer based on the number of days of such taxable period up
to and including the Closing Date and the number of days of such taxable period
after the Closing Date. Seller shall pay the proportionate amount of such Taxes
that is attributable to the portion of the taxable period ending on the Closing
Date, and Buyer shall pay the proportionate amount of such Taxes that is
attributable to the portion of the taxable period beginning after the Closing
Date.
(d) Notwithstanding the foregoing, Seller shall pay all
income, documentary, use, excise and other Taxes arising in connection with the
consummation of the transactions contemplated under this Agreement, and Buyer
shall pay all transfer and sales Taxes arising in connection with the
consummation of the transactions contemplated under this Agreement.
5.12 Efforts. Seller shall take, and shall cause its subsidiaries to
take, all reasonable steps that are within their power to fulfill those
conditions precedent to Buyer's obligations to close that are dependent upon the
actions of Seller or any of its subsidiaries to consummate the transactions
contemplated by this Agreement, and to cause the representations and warranties
of Seller contained in this Agreement to be true and correct as of the Closing
Date.
5.13 Employee Matters.
(a) From and after the date of this Agreement through the
Closing Date or earlier termination of this Agreement, Buyer has the right to
enter into negotiations with all of the employees of Seller employed in the
Business for their continued employment with Buyer from and after the Closing
Date. Seller shall use its commercially reasonable best efforts to make the
employment services of all current employees of the Business available to Buyer
and shall not solicit any employees to remain with Seller if Buyer offers
employment to such employees. Buyer may offer employment to such current
employees of the Business as Buyer shall determine in its sole discretion. Buyer
shall determine, in its sole discretion, the terms and conditions of offers of
employment to such employees, except that Buyer shall take all actions necessary
or appropriate to permit all employees of Seller who become employees of Buyer
to participate as soon as practical after the Closing Date in the standard
employee benefit programs of Buyer for which they are otherwise eligible. Each
individual offered employment by Buyer shall be considered "newly hired" but
shall be given credit for time served as an employee of Seller or its
subsidiaries for purposes of determining such employee's eligibility for Buyer's
employee benefit plans (including without limitation severance plans, if any)
and salary structure.
(b) Notwithstanding the foregoing subsection (a), Buyer shall
offer employment to Dan Cook and Jim Grant on the terms and subject to the
conditions contained in the offer letters attached hereto as Exhibit 5.13(b).
(c) Buyer agrees to pay severance according to the standard
severance policy of Buyer and its Affiliates to any current employees of the
Business to whom Buyer does not offer employment.
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(d) Notwithstanding any other provision of this Agreement, the
provisions of this Section 5.14 shall inure solely to the benefit of Seller and
no third party (including, without limitation, any employee of Seller) shall be
permitted to rely hereon as a third party beneficiary or otherwise.
5.14 Bulk Sales. Seller and Buyer acknowledge and agree that no
provision in this transaction has been made to comply with the Bulk Sales Act or
any statutory or regulatory protection for unsecured creditors of Seller or any
of its subsidiaries. To the extent that the Bulk Sales Act applies, Seller and
Buyer agree to cooperate with each other for the prompt payment of any unsecured
creditor of Seller who may have rights under the Bulk Sales Act.
5.15 Notification of Certain Matters. Each of the parties hereto shall
give prompt notice to the other parties hereto of the occurrence or
non-occurrence of any event to which such party becomes aware, the occurrence or
non-occurrence of which would be reasonably likely to cause (a) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect, or (b) any covenant or condition or
agreement contained in this Agreement not to be complied with or satisfied in
any material respect. The delivery of any notice pursuant to this Section 6.1
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
5.15 Future Acquisitions. Buyer agrees that if it acquires the stock or
substantially all the assets of either of the entities identified on Exhibit
5.15 within eighteen months after the Closing Date, Buyer shall pay to Seller a
finder's fee of 5% of the first one million dollars of the final adjusted
purchase price for such transaction, 4% of the second one million dollars of the
final adjusted purchase price for such transaction, 3% of the third one million
dollars of the final adjusted purchase price for such transaction, 2% of the
fourth one million dollars of the final adjusted purchase price for such
transaction, and 1% of the excess of the final adjusted purchase price for such
transaction above .
5.16 Post-Closing Name Change of Seller. As soon as practicable, but in
no event fewer than fifteen (15) business days after Closing, Seller shall take
all actions and make all filings with appropriate state and federal Governmental
Authorities to change its name from USTMAN Technologies, Inc.
5.17 Transfer of Website. In order to allow the orderly transition of
the material and content of Seller's website to Buyer's or its Affiliates'
website, no later than fifteen (15) business days following the Closing, Seller
shall (i) download all material and content of Seller's website to a medium that
will permit such material and content to be uploaded onto the website of Buyer
and its Affiliates, and (ii) deliver title and control of the URL www.ustman.com
to Buyer.
5.18 Liability Insurance. Seller and Buyer agree that they shall share
equally the cost to purchase for the benefit of Buyer and its affiliates (who
will be additional named insureds under such insurance policy) continuing
insurance coverage under Seller's comprehensive general liability insurance
policy for a period of six months following the Closing Date, which insurance
policy shall be structured to provide to Buyer and its affiliates insurance
coverage with respect to product liability, personal injury or property damage
arising out of events or occurrences relating to products manufactured or
services provided by Seller or any of its
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subsidiaries on or prior to the Closing Date (whether or not such event or
occurrence arises after the Closing Date).
5.19 Intellectual Property Matters. Prior to Closing, Seller shall
file, or cause to be filed, at Seller's sole expense, applications to register
the following trade/service marks in the United States Patent and Trademark
Office ("PTO"): USTMAN and SIRAS (the latter formerly registered as Registration
No. 1,790,965, which registration was cancelled by the PTO). Seller, at Seller's
sole expense, shall also respond to the outstanding Official Action refusing
registration in Application No. 75/630,467 for registration of the mark TANKTRAX
before the due date for response and shall use its best efforts to obtain the
registration of said mark whether before or after Closing.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligation of Buyer to effect the transactions contemplated by this
Agreement is subject to the satisfaction or waiver, at or before the Closing
Date, of the following conditions:
6.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of Seller contained in this Agreement shall
have been true and correct when made and shall be true and correct as of the
Closing Date as if made for the first time on the Closing Date, except for
representations and warranties made as of a specific date, which need be true
and correct only as of such specific date; all of the terms, covenants,
agreements and conditions of this Agreement to be complied with, performed or
satisfied by Seller on or before the Closing Date shall have been duly complied
with, performed or satisfied; and a certificate to the foregoing effects dated
the Closing Date and signed by an officer of Seller shall have been delivered to
Buyer.
6.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
Buyer's proposed acquisition of the Purchased Assets shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking the
foregoing be pending. There shall be no action, suit, claim, litigation or
proceeding of any nature pending before any administrative or judicial body or
threatened against Buyer, Seller or any of its subsidiaries, any of their
respective properties or any of their officers or directors, that could
materially and adversely affect the Purchased Assets or the ability of Buyer to
own or control the Purchased Assets, or that questions the validity or legality
the transaction contemplated by this Agreement or Seller's or any of its
subsidiaries' right to transfer the Purchased Assets as provided in this
Agreement or to comply with their obligations under this Agreement.
6.3 Opinions of Counsel. Buyer shall have received an opinion from
counsel to Seller, dated the Closing Date, to the effect that, as applicable,
the stockholders of Seller have properly executed and delivered a written
consent approving the transactions contemplated by this Agreement pursuant to
the laws of the State of California and applicable federal securities laws or
the Seller Stockholders Meeting was duly noticed and convened and that the
consummation of the transactions contemplated by this Agreement was duly
authorized by the stockholders of Seller at that meeting and as to such other
matters of law as are reasonably
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requested by Buyer and which are customary in transactions of the nature
contemplated by this Agreement. Buyer shall have received an unqualified opinion
from counsel to the Sagaponack Entities, dated of even date herewith, and in
form and substance acceptable to Buyer, to the effect that the guaranty to be
delivered to Buyer by the Sagaponack Entities is enforceable against the
Sagaponack Entities, was properly authorized by all appropriate partnership
action by the partners of the Sagaponack entities, was properly executed and
delivered by the Sagaponack Entities and as to such other matters of law as are
reasonably requested by Buyer which are customary with respect to the delivery
of guaranties.
6.4 Consents and Approvals. All necessary consents of and filings with
any Governmental Entity or third party (including without limitation any Seller
Third Party Consents), relating to the completion by Seller of the transactions
contemplated hereby shall have been obtained and made, except that Buyer shall
not require Seller to deliver consents from Customers or lessors of personal
property listed in Section 3.15(d) of the Disclosure Schedule.
6.5 Charter Documents. Seller shall have delivered to Buyer (i) a copy
of the Certificate of Incorporation, with all amendments and supplements
thereto, of Seller certified to be true, accurate and complete by the Secretary
of State of the State of California and of each of Seller's subsidiaries
certified to be true, accurate and complete by the appropriate authority of the
state of its incorporation, (ii) a copy of the Bylaws, with all amendments and
supplements thereto, of Seller and each of its subsidiaries certified to be
true, accurate and complete by the Secretary of Seller; (iii) a copy of the
resolutions of the Board of Directors of Seller and each of Seller's
subsidiaries authorizing the execution and delivery of this Agreement, the
completion of the transactions contemplated hereby, and the performance of the
obligations hereunder certified to be true, accurate and complete and of
continuing force and effect without repeal by the Secretary of Seller, and (iv)
an incumbency certificate for Seller and each of its subsidiaries other than
Toxguard Systems, Inc.
6.6 Sagaponack Documents. Sagaponack shall have delivered to Buyer
simultaneously with the execution and delivery of this Agreement the Voting
Support Agreement and, jointly and severally with Sagaponack International
Partners, L.P., a Delaware limited partnership (together with Sagaponack, the
"Sagaponack Entities"), a guaranty of Seller's obligations hereunder in
substantially the form attached hereto as Exhibit D.
6.7 No Material Adverse Change. There have been no Material Adverse
Effects since the date of this Agreement. No material adverse changes in the
business, operations, affairs, prospects, properties, assets, existing and
potential liabilities, obligations, profits or condition (financial or
otherwise), or customer relationships of the Business shall have occurred since
the date of this Agreement; and Buyer shall have received a certificate signed
on behalf of Seller dated the Closing Date to such effect.
6.8 HSR Act. The waiting period, if any, applicable to the consummation
of the transaction contemplated by this Agreement under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act") shall have
expired or been terminated.
6.10 Stockholder Approval.
(a) If applicable under Section 5.10, the Information
Statement shall have
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been filed with the SEC and cleared by the SEC for mailing to Seller's
stockholders, and the stockholders of Seller shall have duly approved and
adopted this Agreement and the transactions contemplated by this Agreement by
delivering the Seller Stockholders Approval in accordance with California law
and the Charter Documents or, the Proxy Statement shall have been filed with the
SEC and cleared by the SEC for mailing to Seller's stockholders, and the
stockholders of Seller shall have been duly approved and adopted this Agreement
and the transactions contemplated by this Agreement at the Seller Stockholders
Meeting in accordance with California law and the Charter Documents.
(b) The Sagaponack Entities and any other parties, if
applicable, as the holders of the Series A Preferred Stock of Seller, shall have
delivered in writing to Buyer their consent to this Agreement and the
transactions contemplated hereunder.
6.11 Closing Deliveries. Seller shall have delivered to Buyer all of
the instruments, documents, agreements and items required to be delivered by
Seller to Buyer at the Closing.
6.12 Laws, Ordinances. Since the date of this Agreement, no law,
ordinance, or regulation shall have been enacted or promulgated that could
reasonably be expected to substantially limit the right of Buyer to own or
control the Purchased Assets.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligation of Seller to effect the transactions contemplated hereby
are subject to the satisfaction or waiver, at or before the Closing Date, of the
following conditions:
7.1 Representations and Warranties; Performance of Obligations. All of
the representations and warranties of Buyer contained in this Agreement shall
have been true and correct when made and shall be true and correct as of the
Closing Date as if made for the first time on the Closing Date, except for
representations and warranties made as of a specific date, which need be true
and correct only as of such specific date; all of the terms, covenants,
agreements and conditions of this Agreement to be complied with, performed or
satisfied by Buyer on or before the Closing Date shall have been duly complied
with, performed or satisfied; and a certificate to the foregoing effects dated
the Closing Date and signed by an officer of Buyer shall have been delivered to
Seller.
7.2 No Litigation. No temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or provision challenging
Buyer's proposed acquisition of the Purchased Assets shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending.
7.3 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency or third party relating to the consummation
by Buyer of the transactions contemplated herein shall have been obtained and
made.
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7.4 HSR Act. The waiting period, if any, applicable to the consummation
of the transaction contemplated by this Agreement under the HSR Act shall have
expired or been terminated.
7.5 Opinion of Counsel. Seller shall have received an opinion from
counsel to Buyer, dated the Closing Date, to the effect that this Agreement was
duly authorized, executed and delivered by Buyer.
8. INDEMNIFICATION
8.1 Indemnification by Seller. Seller covenants and agrees to
indemnify, pay, defend, protect and hold harmless Buyer and its officers,
directors, employees, stockholder, assigns, successors and affiliated companies,
including without limitation Danaher Corporation (individually, an "Buyer
Indemnified Party" and collectively, "Buyer Indemnified Parties") from, against
and in respect of:
(a) all liabilities, losses, claims, damages, punitive
damages, causes of action, lawsuits, administrative proceedings (including
informal proceedings), investigations, audits, demands, assessments,
adjustments, judgments, settlement payments, deficiencies, penalties, fines,
(including without limitation reasonable attorneys' fees and disbursements of
every kind, nature and description) together with interest at eight percent per
annum from the date thereof (collectively, "Damages") actually suffered,
sustained, incurred or paid by any of the Buyer Indemnified Parties in
connection with, resulting from or arising out of, directly or indirectly:
(i) any breach of or inaccuracy in any representation
or warranty made by Seller in this Agreement or in any schedule or certificate,
delivered by or on behalf of Seller in connection herewith; or
(ii) any breach of or failure to perform any covenant
or agreement made by Seller in this Agreement;
(iii) any Excluded Liabilities;
(iv) RESERVED
(v) RESERVED
(vi) RESERVED
(vii) RESERVED
(viii) any lawsuit or claim by any shareholder of
Seller relating to or in any way arising out of the transactions contemplated by
this Agreement, including, without limitation, the Lawsuit;
(ix) the matters disclosed in Section 8.1(a)(ix) of
the Disclosure Schedule; and
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(b) any and all Damages incident to any of the foregoing or to
the enforcement of this Section 8.1.
8.2 Limitation and Expiration. Notwithstanding the above:
(a) there shall be no liability for indemnification under
Section 8.1 unless, and solely to the extent that, the aggregate amount of
Damages exceeds $250,000 (the "Indemnification Deductible"); provided, however,
that the Indemnification Deductible shall not apply to (i) Damages arising out
of any breaches of the covenants of Seller set forth in this Agreement or
representations and warranties made in Sections 3.13, 3.19, 3.20, 3.21, 3.30,
(iii) the Excluded Liabilities or any matter listed in Section 8.1(a)(ix) of the
Disclosure Schedule, (iv) any Purchase Price Adjustment made pursuant to Section
1.3 or (v) the matters identified in Section 8.1(a)(viii);
(b) the indemnification obligations under this Article 8 or in
any certificate or writing furnished in connection herewith shall terminate on
the later of clause (i) or (ii) of this Section 8.2(b):
(i) (1) except as to representations and warranties
specified in clause (i)(2) of this Section 8.2(b), April 1, 2003 (the "Survival
Period"), or
(2) with respect to representations and
warranties contained in Sections 3.13 and 3.21 and the Excluded Liabilities, on
(A) the date that is the expiration of the longest applicable federal or state
statute of limitation (including extensions thereof), or (B) if there is no
applicable statute of limitation, ten (10) years after the Closing Date; or
(ii) the final resolution of claims or demands (a
"Claim") pending as of the relevant dates described in clause (i) of this
Section 8.2(b) (such claims referred to as "Pending Claims").
8.3 Indemnification Procedures. All Claims for indemnification under
this Article 8 shall be asserted and resolved as follows:
(a) In the event that any Buyer Indemnified Party or Seller
Indemnified Party (each, as the case may be, an "Indemnified Party") has a Claim
against any party obligated to provide indemnification pursuant to Section 8.1
hereof (the "Indemnifying Party") which does not involve a Claim being asserted
against or sought to be collected by a third party, the Indemnified Party shall
promptly, but in no event later than ten (10) business days after knowledge of
the Claim, notify the Indemnifying Party of such Claim, specifying the nature of
such claim and the amount or the estimated amount thereof to the extent then
feasible (the "Claim Notice"). If the Indemnifying Party does not notify the
Indemnified Party within thirty (30) days from the receipt of the Claim Notice
(the "Notice Period") that the Indemnifying Party disputes such Claim, the Claim
shall be conclusively deemed a liability of the Indemnifying Party hereunder and
the Indemnifying Party shall have the obligation to promptly pay the Indemnified
Party the actual amount of such Claim. In case an objection is made in writing
in accordance with this Section 8.3(a), the Indemnified Party shall have thirty
(30) days to respond in a written statement to the objection. If after such
thirty (30) day period there remains a dispute
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as to any Claims, the parties shall attempt in good faith for sixty (60) days to
agree upon the rights of the respective parties with respect to each of such
Claims.
(b) In the event that any Claim for which the Indemnifying
Party would be liable to an Indemnified Party hereunder is asserted against an
Indemnified Party by a third party, the Indemnified Party shall promptly, but in
no event later than ten (10) business days after knowledge of the Claim, send a
Claim Notice with respect to such Claim to the Indemnifying Party. The
Indemnifying Party shall have the Notice Period to notify the Indemnified Party
(i) whether or not it disputes the liability to the Indemnified Party hereunder
with respect to such Claim and (ii) regardless of whether the Indemnifying Party
disputes liability, whether or not the Indemnifying Party desires to defend the
Indemnified Party against such Claim, at the sole cost and expense of the
Indemnifying Party, provided that the Indemnified Party is hereby authorized
(but not obligated) prior to and during the Notice Period to file any motion,
answer or other pleading and to take any other action which the Indemnifying
Party shall deem necessary to protect the Indemnifying Party's interests. In the
event that the Indemnifying Party notifies the Indemnified Party within the
Notice Period that the Indemnifying Party desires to defend the Indemnified
Party against such Claim and except as hereinafter provided, such party shall
have the right to defend the Indemnified Party by appropriate proceedings, which
proceedings shall be promptly settled or prosecuted by such party to a final
conclusion. The Indemnifying Party shall not, without the prior written consent
of the Indemnified Party, which consent shall not be unreasonably withheld,
settle, compromise or offer to settle or compromise any such Claim on a basis
that (i) would result in the imposition of a consent order, injunction or decree
that would restrict the future activity or conduct of, or have a materially
adverse effect on the assets, liabilities, financial condition, results of
operations or business prospects of, the Indemnified Party or any subsidiary or
Affiliate thereof, (ii) would result in any monetary liability of the
Indemnified Party that will not be paid or reimbursed by the Indemnifying Party,
or (iii) that would not result in a complete and unconditional release of the
Indemnified Party. If the Indemnified Party desires to participate in, but not
control, any such defense or settlement the Indemnified Party may do so at its
sole cost and expense. If the Indemnifying Party elects not to defend the
Indemnified Party against such Claim, whether by failure of such party to give
the Indemnified Party timely notice as provided above or otherwise, then the
Indemnified Party, without waiving any rights against such party, may settle
(after giving notice to the Indemnifying Party and allowing the Indemnifying
Party three (3) days to comment upon the proposed settlement) or defend against
any such Claim in the Indemnified Party's sole discretion and the Indemnified
Party shall be entitled to recover from the Indemnifying Party the amount of any
settlement or judgment and, on an ongoing basis, all indemnifiable costs and
expenses of the Indemnified Party with respect thereto, including interest from
the date such costs and expenses were incurred.
(c) If the Indemnifying Party assumes the defense with respect
to any Claim of a third party, the Indemnified Party shall have the right to
participate in the defense thereof and to employ separate counsel reasonably
acceptable to the Indemnifying Party, at the Indemnifying Party's sole expense,
if such Claim involves, in the good faith belief of the Indemnified Party, a
conflict of interest between or substantially different defenses for the
Indemnified Party and the Indemnifying Party.
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(d) Any failure of the Indemnified Party's to give prompt
notice as required by this Section 8.3 of any actual, threatened or possible
claim or demand which may give rise to a right of indemnification hereunder
shall not constitute a waiver of the Indemnifying Party's indemnity obligations
hereunder except to the extent that the failure to give such notice materially
prejudiced the Indemnifying Party.
(e) The parties will make appropriate adjustments for any Tax
benefits, Tax detriments or insurance proceeds in determining the amount of any
indemnification obligation under Article 8.
8.4 Manner of Payment. Any indemnification obligations of Seller
pursuant to Section 8.2 shall be paid first by reduction of the Holdback, and
second by wire transfer from Seller of immediately available funds to an account
designated in writing by the applicable Indemnified Party within five (5) days
after the determination thereof.
8.5 Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants made by Seller and Buyer in or
pursuant to this Agreement or in any document delivered pursuant hereto shall be
deemed to have been made on the date of this Agreement (except as otherwise
specifically provided herein) and, if a Closing occurs, as of the Closing Date.
The representations and warranties of Seller will survive the Closing and will
remain in effect until, and will expire upon, the termination of the relevant
indemnification obligation as provided in Section 8.2. The representations and
warranties of Buyer will survive the Closing and will remain in effect until,
and will expire upon the later of (i) the first anniversary of the Closing Date
or (ii) the date of the final resolution of Claims pending as of the first
anniversary of the Closing Date. The covenants of the parties set forth in this
Agreement shall survive the Closing and shall expire in accordance with their
respective terms.
8.6 Other Indemnification Matters. Except with respect to matters
involving fraud, the indemnity provided herein shall be the sole and exclusive
remedy of the parties hereto, their Affiliates, successors and assigns with
respect to any and all Claims for losses sustained or incurred arising out of
this Agreement and the transactions contemplated herby; except that, nothing
contained herein shall limit the right of Buyer to seek contribution from Seller
for any Damages arising out of any Excluded Liabilities after the expiration of
the indemnification obligations under this Article 8. Notwithstanding the other
provisions of this Article 8, Buyer agrees that prior to seeking any
indemnification payment from Seller for a specific matter for which Seller is
obligated to indemnify Buyer hereunder (each an "Indemnification Claim"), Buyer
will first use commercially reasonable efforts (which shall not include
expending any funds to third parties or pursuing litigation, arbitration or any
other dispute resolution process) to seek payment of the Indemnification Claim
under any insurance policies (except self-insurance policies) under which
coverage of the Indemnification Claim is available to Buyer; provided, however;
that in the event that Seller shall be unable, because of lack of privity,
because Seller is not a named insured or additional insured under an applicable
insurance policy or because Seller does not otherwise have the legal right, to
seek payment under an insurance policy of the Indemnification Claim, Seller
shall have the right, at Seller's sole cost and expense, and subject to the
succeeding sentences hereof, to commence proceedings against an applicable
insurance company that has refused to provide payment of an amount that is the
subject of an Indemnification Claim. Buyer agrees to cooperate with Seller in
connection with a claim brought
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by Seller as provided in the previous clause against any such insurance company
in any commercially reasonable manner requested by Seller provided that Buyer
shall not be required to incur any cost in doing so. Seller shall have the right
to take any such action against such insurance company in Buyer's name and, for
that purpose and only to such extent, all of the rights of Buyer to enforce the
obligations of such insurance company related to such Indemnified Claim are
hereby conferred upon and conditionally assigned to Seller; provided, further,
however, that Seller shall only have such rights if prior to the commencement of
any such action Seller provides such security (in the form of a guaranty,
deposit or other arrangement) to Buyer as Buyer reasonably deems necessary to
secure Seller's obligation to fund the expenses of any such action and to
indemnify Buyer for the Insurance Indemnification (as later defined). Seller
shall indemnify and hold Buyer harmless from and against any and all losses,
costs, liability, claims, damages, expenses, penalties and fines which Buyer may
incur in connection with or arising out of the taking of any such action by
Seller (the "Insurance Indemnification"). Notwithstanding the foregoing, if
Seller proceeds against an insurance company as contemplated in the foregoing
sentences, Seller shall pay the Indemnification Claim to Buyer prior to
commencing such proceedings.
8.7 Indemnification by Buyer. From and after the Closing Date, Buyer
shall indemnify, pay, defend, protect and hold harmless Seller and its officers,
directors, employees, stockholders, assigns, successors and affiliated companies
(each a "Seller Indemnified Party") from and against Damages actually suffered,
sustained, incurred or paid by a Seller Indemnified Party as a result of any
breach or inaccuracy contained in any representation or warranty made by Buyer
in this Agreement, any breach of any covenant of Buyer contained in this
Agreement or Buyer's operation of the Business after the Closing Date, or
failure of Buyer to pay or perform any of the Assumed Liabilities; provided that
Buyer shall not be required to indemnify any Seller Indemnified Party under this
Section 8.7 from or against any Damages for which Seller will indemnify a Buyer
Indemnified Party under Section 8.1 of this Agreement.
9. RESTRICTIVE COVENANTS
9.1 Prohibited Activities.
(a) Seller covenants and agrees with Buyer that it shall not,
and shall cause its subsidiaries to not, for a period of four (4) years
following the Closing Date, for any reason whatsoever, directly or indirectly,
or in conjunction with any other person, persons, company, partnership,
corporation or business of whatever nature (each a "Person"):
(i) engage, directly or indirectly, as a shareholder, owner,
partner, member, joint venturer, or through its employees, whether as an
independent contractor, consultant, advisor, sales representative or otherwise,
in the business of designing, manufacturing, distributing or selling any
products that compete with the products of the Business or providing services
that compete with the services provided by the Business (collectively, the
"Competitive Products and Services") in direct competition with the Business
anywhere within the United States, South America, Latin, America, Canada, Asia,
Australia, New Zealand and Europe (the geographic locations in this subsection
(a) being the "Territory"). "Competitive Products and Services" includes all
activities of Company that constitute the Business, which includes without
limitation, providing leak detection services to owners and operators of
underground storage
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tanks, licensing fuel management software and selling related fuel management
products, marketing automatic tank gauge systems, and marketing regulatory
compliance software;
(ii) solicit any person who is, at that time, within the
Territory, an employee of Buyer or any company affiliated with Buyer that is
engaged in the design, manufacturer, distribution or sale of Competitive
Products and Services for the purpose or with the intent, of enticing such
employee away from or out of the employ of Buyer or any of its Affiliates; or
(iii) solicit any person who is or entity that is, at that
time, or that has been, within one year prior to that time, a customer of Buyer
within the Territory for the purpose of soliciting or selling products or
services in competition with the Competitive Products or Services.
(b) Seller acknowledges and agrees that Seller is a sophisticated
corporation that conducts business throughout the world and that accordingly the
duration and geographic scope of the non-competition provision set forth in this
Section 9.1 are reasonable. In the event that any court determines that the
duration or the geographic scope, or both, are unreasonable and that such
provision is to that extent unenforceable, the Parties agree that the provision
shall remain in full force and effect for the greatest time period and in the
greatest area that would not render it unenforceable. The Parties intend that
this non-competition provision shall be deemed to be a series of separate
covenants, one for each and every county of each and every state of the United
States of America and each and every political subdivision of each and every
country outside the United States of America where this provision is intended to
be effective.
9.2 Confidentiality. Seller recognizes that by reason of its ownership
of the Business it has acquired confidential information and trade secrets
concerning the operation of the Business, the use or disclosure of which could
cause Buyer or its affiliates or subsidiaries substantial loss and damages that
could not be readily calculated and for which no remedy at law would be
adequate. Accordingly, Seller covenants and agrees with Buyer that it will not,
and will cause its subsidiaries to not, at any time, except with the prior
written consent of Buyer, directly or indirectly, disclose any secret or
confidential information that it may learn or has learned by reason of its
relationship to or ownership of the Business, or use any such information in a
manner detrimental to the interests of Buyer. The term "confidential
information" includes, without limitation, information not previously disclosed
to the public or to the trade by Seller's management with respect to the
Business, facilities, methods, trade secrets and other intellectual property,
software, systems, procedures, operational policies, manuals, confidential
reports, product price lists, pricing and cost policies, customer lists,
financial information (including the revenues, costs, or profits associated with
the Business), business plans, prospects, or opportunities related to the
Business but shall exclude (i) any information already in the public domain,
(ii) information that becomes part of the public domain by publication or
otherwise, except by a breach of this Agreement, (iii) information that Seller
can establish by reasonable proof was received from a third party with a right
to disclose it; or (iv) information that Seller is obligated to disclose by law
or in legal proceedings; provided, however, that Seller shall provide prompt
notice of any need to make such disclosure and cooperate with the disclosing
party in obtaining available protective orders, if any, relating thereto.
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9.3 Damages. Because of the difficulty of measuring economic losses to
Buyer as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to Buyer for which it
would have no other adequate remedy, Seller agrees that the foregoing covenant
may be enforced by Buyer in the event of breach by Seller or any of its
subsidiaries by injunctions and restraining orders.
9.4 Reasonable Restraint. The parties agree that the foregoing
covenants in this Article 9 impose a reasonable restraint on Seller and its
subsidiaries in light of the activities and business of Buyer on the date of the
execution of this Agreement and the current plans of Buyer.
9.5 Severability; Reformation. The covenants in this Article 9 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent that the
court deems reasonable, and the Agreement shall thereby be reformed.
9.6 Independent Covenant. All of the covenants in this Article 9 shall
be construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of Seller against
Buyer or any of its affiliates, whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by Buyer of such
covenants. The parties expressly acknowledge that the terms and conditions of
this Article 9 are independent of the terms and conditions of any other
agreements. It is specifically agreed that the period of four (4) years stated
at the beginning of this Article 9 during which the agreements and covenants of
Seller made in this Article 9 shall be effective, shall be computed by excluding
from such computation any time during which Seller is found by a court of
competent jurisdiction to have been in violation of any provision of this
Article 9. The covenants contained in Article 9 shall not be affected by any
breach of any other provision hereof by any party hereto and shall have no
effect if the transactions contemplated by this Agreement are not consummated.
9.7 Materiality. Seller hereby agrees that the covenants set forth in
this Article 9 are a material and substantial part of the transactions
contemplated by this Agreement, supported by adequate consideration.
10. GENERAL
10.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing Date , whether before or after approval of this Agreement by Seller's
stockholders, solely:
(i) by mutual written consent of Buyer and Seller;
(ii) by Seller, on the one hand, or by Buyer, on the
other hand, if the Closing shall not have occurred on or before 5:00 p.m.
Washington, D.C. time on September 30, 2000 provided that the right to terminate
this Agreement under this Section 10.1(b) shall not be available to either party
whose misrepresentation, breach of warranty or failure to fulfill any
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obligation under this Agreement has been the cause of, or resulted in, the
failure of the Closing to occur on or before such date; or
(iii) by Buyer if there has been a material breach by
Seller of the representations and warranties of Seller set forth in this
Agreement or a material breach of a covenant of Seller hereunder, in each case
which renders the conditions in Article 6 hereof incapable of being satisfied;
provided, however, that the right to terminate this Agreement pursuant to
Section 10.1(c) shall not be available to Buyer if Buyer, at such time, is in
material breach of any representation, warranty, covenant or agreement set forth
in this Agreement;
(iv) by Seller if there has been a material breach by
Buyer of the representations and warranties of Buyer set forth in Article 4 or a
material breach of a covenant of Buyer hereunder, in each case which renders the
conditions in Article 7 incapable of being satisfied; provided, however, that
the right to terminate this Agreement pursuant to Section 10.1(c) shall not be
available to Seller if Seller, at such time, is in material breach of any
representation, warranty, covenant or agreement set forth in this Agreement;
(v) by Seller, on the one hand, or by Buyer, on the
other hand, if there shall have issued a final non-appealable order of a federal
or state court of competent jurisdiction in effect restraining, enjoining, or
otherwise preventing consummation of this Agreement; or there shall be any
action taken, or any statute, rule regulation or order enacted, promulgated or
issued or deemed applicable to the transactions contemplated hereby by any
governmental entity which would make the consummation of this Agreement illegal;
(vi) by either Seller or Buyer if Seller shall have
not obtained the Seller Stockholders Approval or the approval of the
stockholders of Seller at the Seller's Stockholders Meeting; or
(vii) by Seller for the purposes of pursuing an
Acquisition Proposal as contemplated under Section 5.4 .
(b) If (i) this Agreement is terminated pursuant to Section
10.1(a)(vi), (ii) Seller's board of directors fails to approve this Agreement
and the transactions contemplated hereunder, (iii) Seller violates the
provisions of Section 5.4, (iv) the Sagaponack Entities fail to consent to this
Agreement and the transaction contemplated hereunder, or (v) this Agreement is
terminated pursuant to Section 10.1(a)(iii), then Seller shall within ten days
from the termination of this Agreement pay to Buyer a termination fee equal to
$1,000,000 in cash and the reasonable out-of-pocket expenses (not to exceed an
additional $75,000) incurred by Buyer in connection with this Agreement, which
shall be payable immediately upon termination of this Agreement. The agreement
contained in this 10.1(b) is an integral part of the Transactions and
constitutes liquidated damages in the event of the occurrence of the
circumstances specified in this Section 10.1(b) and not a penalty.
10.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 10.1, this Agreement shall forthwith become void,
and there shall be no liability or obligation on the part of any party hereto or
its officers, directors or shareholders. Notwithstanding the foregoing sentence,
(i) the provisions of this Section 10.2 and Sections 5.1(b) and 5.1(c) and the
other provisions of Article 10 (including without limitation brokers and
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expenses), shall remain in full force and effect and survive any termination of
this Agreement; (ii) each party shall remain liable for any breach of this
Agreement prior to its termination; and (iii) in the event of termination of
this Agreement pursuant to Section 10.1(c) or (d), then notwithstanding the
provisions of Section 10.8, the breaching party, shall be liable to the other
party to the extent of the reasonable expenses incurred by such other party in
connection with this Agreement and the transactions contemplated hereby, as well
as any damages in accordance with applicable law.
10.3 Headings. The Article and Section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.4 Successors and Assigns. This Agreement and the rights of the
parties hereunder may not be assigned without the prior written consent of each
of the other parties hereto, except that Buyer, without Seller's prior consent,
may assign its rights and obligations under this Agreement to any of its
affiliates which are directly or indirectly wholly-owned subsidiaries of Danaher
Corporation. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and the successors and permitted assigns of each of the
parties hereto.
10.5 Entire Agreement. This Agreement (which includes the Disclosure
Schedule and Exhibits hereto) sets forth the entire understanding of the parties
hereto with respect to the transactions contemplated hereby. It shall not be
amended or modified except by a written instrument duly executed by each of the
parties hereto. Any and all previous agreements and understandings between or
among the parties regarding the subject matter hereof, whether written or oral,
are superseded by this Agreement. The Disclosure Schedule and each of the
Exhibits to this Agreement is incorporated herein by this reference and
expressly made a part hereof.
10.6 Counterparts. This Agreement may be executed in any number of
counterparts each of which when executed and delivered shall be deemed to be an
original and all of which counterparts taken together shall constitute but one
and the same instrument. This Agreement shall become binding when one or more
counterparts taken together shall have been executed and delivered (which
deliveries may be by telefax) by the parties.
10.7 Expenses. Buyer has paid and will pay the fees, expenses and
disbursements of Buyer and its agents, representatives, accountants and counsel
incurred in connection with the subject matter of this Agreement, whether or not
the transactions contemplated hereby are consummated. Seller has paid and will
pay the fees, expenses and disbursements of Seller and its agents,
representatives, financial advisers, accountants and counsel incurred in
connection with the subject matter of this Agreement, whether or not the
transactions contemplated hereby are consummated.
10.8 Specific Performance; Remedies. Each party hereto acknowledges
that the other parties will be irreparably harmed and that there will be no
adequate remedy at law for any violation by any of them of any of the covenants
or agreements contained in this Agreement, including without limitation, the
confidentiality obligations set forth in Sections 5.1(b) and 5.1 (c) and the
restrictive covenants set forth in Article 9. It is accordingly agreed that, in
addition to
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any other remedies which may be available upon the breach of any such covenants
or agreements, each party hereto shall have the right to obtain injunctive
relief to restrain a breach or threatened breach of, or otherwise to obtain
specific performance of, the other parties, covenants and agreements contained
in this Agreement.
10.9 Notices. Any notice, request, claim, demand, waiver, consent,
approval or other communication which is required or permitted hereunder shall
be in writing and shall be deemed given if delivered personally or sent by
telefax (with confirmation of receipt), by registered or certified mail, postage
prepaid, or by recognized courier service, as follows:
If to Buyer to:
Veeder Root Service Company
1250 24th Street, N.W., Suite 800
Washington, D.C. 20037
Attn: Paul V. Burgon
Telefax: (202) 828-0860
with a required copy to:
Mark A. Dewire, Esq.
Wilmer, Cutler & Pickering
2445 M Street, N.W.
Washington, D.C. 20037
Telefax: (202) 663-6363
If to Seller to:
USTMAN Technologies, Inc.
c/o Sagaponack Partners, L.P.
536 Pacific Avenue
San Francisco, California 94133
Attn: Barry S. Rosenstein
Telefax: (415) 989-8001
with a required copy to:
Zukerman Gore & Brandeis, LLP
900 Third Avenue
Eighth Floor
New York, New York 10022-4728
Attn: Clifford A. Brandeis, Esq.
Telefax: (212) 223-6433
or to such other address as the person to whom notice is to be given may have
specified in a notice duly given to the other party as provided herein. Such
notice, request, claim, demand, waiver, consent, approval or other communication
shall be deemed to have been given as of the date so delivered, telefaxed,
mailed or dispatched and, if given by any other means, shall be deemed given
only when actually received by the addressees.
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10.10 Governing Law. This Agreement shall be construed, performed and
enforced in accordance with, and governed by the laws of the State of Delaware,
without regard to principles of conflicts of laws. Each party to this Agreement
shall have the right to enforce specifically the terms and provisions of this
Agreement in any court of the United States located in the State of Delaware or
in Delaware state court, this being in addition to any other remedy to which
they are entitled at law or in equity or under this Agreement. In addition, each
of the parties hereto (i) consents to submit such party to the personal
jurisdiction of any Federal court located in the State of Delaware or any
Delaware state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (iii) agrees that such party will not
bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a court of the United States located
in the State of Delaware or a Delaware state court. It is further agreed that
any breaching or defaulting party hereunder shall pay to the other parties
hereto such out of pocket costs and expenses, including legal and accounting
fees, as are reasonably incurred in pursuit of such parties' remedies hereunder.
10.11 Severability. If any provision of this Agreement or the
application thereof to any person or circumstances is held invalid or
unenforceable in any jurisdiction, the remainder hereof, and the application of
such provision to such person or circumstances in any other jurisdiction, shall
not be affected thereby, and to this end the provisions of this Agreement shall
be severable.
10.12 Absence of Third Party Beneficiary Rights. Except as otherwise
expressly set forth in this Agreement, no provision of this Agreement is
intended, nor will be interpreted, to provide or to create any third party
beneficiary rights or any other rights of any kind in any client, customer,
affiliate, shareholder, employee, partner of any party hereto or any other
person or entity.
10.13 Mutual Drafting. This Agreement is the mutual product of the
parties hereto, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of each of the parties, and shall not be
construed for or against any party hereto. Each party to this Agreement
acknowledges and represents that it has been represented by its own legal
counsel in connection with the transactions contemplated by this Agreement, with
the opportunity to seek advice as to its legal rights from such counsel.
10.14 Amendment; Waiver. This Agreement may be amended by the parties
hereto at any time prior to the Closing by execution of an instrument in writing
signed on behalf of each of the parties hereto. Any extension or waiver by any
party of any provision hereto shall be valid only if set forth in an instrument
in writing signed on behalf of such party. Any waiver by any party of any
condition or of a breach of any provision, term, covenant, representation or
warranty contained in this Agreement, in any one or more instances, shall not be
deemed to be nor construed as, a further or continuing waiver of any such
condition or of a breach of any other provision, term, covenant, representation
or warranty of this Agreement.
10.15 Public Disclosure. Prior to the Closing Date, neither Buyer nor
Seller shall make any disclosure (whether or not in response to an inquiry) of
the subject matter of this Agreement
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unless previously approved by the other party in writing; provided, however,
that either party may make any public disclosure it believes in good faith is
required by law or regulation or the applicable rules of a stock exchange (in
which case the disclosing party shall advise the other party and provide it with
a copy of the proposed disclosure prior to making the disclosure).
10.16 Accounting Principles. Except as otherwise expressly provided in
this Agreement, all accounting terms used in this Agreement shall be
interpreted, and all financial statements to and certificates and reports as to
financial matters required to be delivered hereunder shall be prepared in
accordance with United States generally accepted accounting principles ("GAAP")
consistently applied.
10.17 Further Assurances. At any time and from time to tune after the
Closing without further consideration, each Party shall execute and deliver such
other instruments of sale, transfer, conveyance and assignment and take such
action as the other party hereto may reasonably determine is necessary to
transfer, convey and assign to the Buyer, to evidence and confirm Buyer's rights
to, title in and ownership of, the Purchased Assets, and to carry out the
purpose and intent of this Agreement.
10.18 Shareholder Lawsuit. The parties acknowledge that on June 8,
2000, Stourbridge Investments Limited, on behalf of itself and the other
shareholders of Seller, filed a lawsuit in the Superior Court of the State of
California in and for the County of Los Angeles, Case Number B-C231418, (the
"Lawsuit") in which Seller and Buyer, among others, were named as defendants and
which made allegations relating to or arising out of the transactions
contemplated by this Agreement. By a letter dated June 27, 2000 (a copy of which
is attached hereto as Exhibit E (the "Indemnity Letter")), Seller agreed to
fully indemnify, defend, pay and hold harmless Danaher Corporation ("Danaher"),
its affiliates, each of its subsidiaries, and each of their officers, directors,
employees, agents and representatives from and against any and all liabilities,
losses, costs, expenses (including costs of mailing, printing, copying and other
administrative expenses), fees (including attorneys' fees), damages, fines and
payments of any kind that any of such indemnified parties may suffer, pay, or
otherwise incur resulting from, arising out of, connecting with or in any way
relating to (i) the Lawsuit or (ii) any other lawsuit, action, proceeding, cause
of action or other claim of any kind made by any of the shareholders of Seller
against any of such indemnified parties. The parties agree that the promises and
covenants made by Seller in the Indemnity Letter are hereby incorporated into
this Agreement as if made herein and shall be in addition to and in no way in
derogation of any of the other indemnity provisions and obligations contained in
this Agreement.
[signatures on following page]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
WITNESS/ATTEST: BUYER:
VEEDER ROOT SERVICE COMPANY
/s/ Paul Burgon
- ---------------------------- By: /s/ James H. Ditkoff
Name: Paul Burgon --------------------------------
Name: James H. Ditkoff
-------------------------------
Title: Vice President
-------------------------------
SELLER:
USTMAN TECHNOLOGIES, INC.
/s/ Lori Passerella
- ---------------------------- By: /s/ Dan R. Cook
Name: Lori Passerella --------------------------------
Name: Dan R. Cook
-------------------------------
Title: President
-------------------------------
[signatures continued on following page]
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CONSENT OF HOLDERS OF SERIES A PREFERRED STOCK
Executing this Agreement for purposes of consenting to this Agreement and the
transactions contemplated hereunder as the holders of the Series A Preferred
Stock of Seller:
SAGAPONACK PARTNERS, L.P.
By: RSP Capital, L.L.C.
/s/ Gregg Schultz By: /s/ Barry S. Rosenstein
- ------------------------- ------------------------------
Name: Gregg Schultz Name: Barry S. Rosenstein
Title: Managing Member
SAGAPONACK INTERNATIONAL
PARTNERS, L.P.
By: RSP Capital, L.L.C.
/s/ Gregg Schultz By: /s/ Barry S. Rosenstein
- ------------------------- ------------------------------
Name: Gregg Schultz Name: Barry S. Rosenstein
Title: Managing Member
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<PAGE> 88
ANNEX B
July 21, 2000
Board of Directors
USTMAN Technologies, Inc.
12265 West Bayaud Avenue
Suite 300
Lakewood, Colorado 80228
To The Board of Directors:
Under an engagement letter dated June 9, 2000, USTMAN Technologies, Inc.
("USTX", or the "Company") retained H.C. Wainwright & Co., Inc. ("Wainwright")
to provide an opinion as to the fairness from a financial point of view of the
Purchase Price (as defined below) to be paid to USTX in connection with the
acquisition (the "Acquisition") of the assets of USTX by Danaher Corporation,
either directly or through a wholly-owned subsidiary ("DHR"), as set forth in
the Asset Purchase Agreement by and among Veeder-Root Service Company and USTMAN
Technologies, Inc. dated as of July 21, 2000 (the "Acquisition Agreement"). The
Acquisition Agreement provides for the purchase by DHR of substantially all of
USTX's assets and certain liabilities for $17.158 million in cash, with no
financing contingency (the "Purchase Price"). The Purchase Price is subject to
revision by the amount, if any, that USTX's closing balance sheet is in excess
of, or less than, its December 31, 1999 cash and debt-free net equity.
Wainwright was selected by USTX's board of directors to render an opinion as to
the fairness from a financial point of view of the Purchase Price to be paid to
USTX, based on Wainwright's qualifications, reputation and expertise, and
familiarity with USTX.
Wainwright has reviewed with USTX's Board of Directors, among other things,
assumptions made, procedures followed, matters considered and limitations on the
scope of review undertaken by Wainwright in the course of rendering its opinion.
The opinion addresses the fairness to USTX of the aggregate consideration to be
paid to USTX by DHR for the assets and certain liabilities of USTX, from a
financial point of view, as of the date of the Wainwright opinion, and does not
constitute a recommendation to any stockholder.
In arriving at its opinion, Wainwright reviewed certain publicly available
business and financial information relating to USTX, including the exchange, at
the request of the management of USTX, of Sagaponack Partners, L.P.'s $7,000,000
in Senior Subordinated Notes and $2,717,000 in accrued interest, for $15,000,000
of Series A Preferred Stock in December 1998, as well as the Acquisition
Agreement. Wainwright also reviewed certain other information, including
financial forecasts, provided to it by USTX, and discussed the business, both
past and current, and future prospects of USTX. Wainwright also considered
certain financial and stock market data of USTX, and Wainwright compared that
data with similar data for other publicly held companies in businesses
Wainwright deemed similar to those of USTX. Wainwright considered the financial
terms, to the extent publicly available, of certain other recent business
combinations and other transactions, which have recently been effected, and that
Wainwright deemed relevant. Wainwright also considered such other information,
financial studies, analyses and investigations and financial, economic and
market criteria, which it deemed relevant. In connection with its review,
Wainwright did not assume any responsibility for independent verification of any
of the foregoing information and relied on the completeness and accurateness in
all material respects as represented by USTX . With respect to financial
forecasts, Wainwright assumed that they had been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of USTX as to the future financial performance of USTX. In addition,
Wainwright did not make an independent evaluation or appraisal of the assets or
liabilities
B-1
<PAGE> 89
July 21, 2000
Page 2.
(contingent or otherwise) of USTX, nor was Wainwright furnished with any such
evaluations or appraisals. The Wainwright opinion is necessarily based upon
financial, economic, market and other conditions as they existed and could be
evaluated as of the date of the Wainwright opinion. Wainwright did not express
any opinion as to the prices that USTX and DHR common stock will trade
subsequent to the Acquisition.
We have assumed that the Purchase Price was determined by arm's-length
negotiation between the parties. In preparing the Wainwright opinion, Wainwright
performed a variety of financial and comparative analyses. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. Wainwright believes that its analyses
must be considered as a whole and that selecting portions of its analyses and of
the factors considered by it, without considering all analyses and factors,
could create a misleading view of the process underlying the Wainwright opinion.
No company or transaction used in the analysis performed by Wainwright as a
comparison is identical to USTX. In addition, Wainwright may have given various
analyses more or less weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions, so that the range of
valuation resulting from any particular analysis undertaken should not be taken
to be Wainwright's view of the actual value of, USTX, . In performing its
analyses, Wainwright made numerous assumptions with respect to industry
performance and general business and economic conditions and other matters, many
of which are beyond the control of USTX. The analyses performed by Wainwright
are not necessarily indicative of actual values or actual future results, which
may be significantly more or less favorable than suggested by such analyses. In
addition, analyses relating to the value of businesses or assets do not purport
to be appraisals or to necessarily reflect the prices at which businesses or
assets may actually be sold. The analyses performed were prepared solely as part
of Wainwright's analysis of the fairness of the aggregate consideration and the
applicable purchase price to USTX from a financial point of view and were
provided to the USTX board of directors in connection with the delivery of the
Wainwright opinion.
Wainwright has rendered an opinion to USTX in connection with the proposed
Acquisition outlined herein, and will receive a fee for our services.
In the ordinary course of our business, Wainwright may have actively traded the
equity securities of the USTX or DHR and may continue to actively trade the
equity securities of USTX or DHR. In addition, certain individuals who are
employees or are affiliated with Wainwright have in the past and may currently
be shareholders of USTX.
Based upon and subject to the foregoing, it is Wainwright's opinion that, as of
the date hereof, the Purchase Price, for substantially all of the assets and
certain liabilities of USTX is fair, from a financial point of view to USTX.
We understand that you will include this opinion in its entirety as part of the
information you will distribute to the stockholders of USTX and file with the
Securities and Exchange Commission. We hereby consent to such distribution and
filing.
Very truly yours,
H.C. WAINWRIGHT & CO., INC
By: /s/ Scott A. Weisman
----------------------------
Scott A. Weisman
Managing Director
B-2
<PAGE> 90
ANNEX C
PLAN OF LIQUIDATION AND DISSOLUTION
OF
USTMAN TECHNOLOGIES, INC.
This Plan of Liquidation and Dissolution (the "Plan") is for the
purpose of effecting the complete liquidation and dissolution of USTMAN
Technologies, Inc., a California corporation (the "Company"), in accordance with
and pursuant to the applicable provisions of the California General Corporation
Law and Section 331 of the Internal Revenue Code of 1986, as amended, in
substantially the following manner:
1. EFFECTIVE DATE.
The Plan shall be effective on the date (the "Effective Date"), after
it is adopted and approved by the affirmative vote of the holders of a majority
of the outstanding shares of Common Stock, no par value, of the Company ("Common
Stock") entitled to vote thereon, and subsequent to the closing of the sale of
the Company's business and substantially all of its assets pursuant to that
certain Asset Purchase Agreement dated July 21, 2000 (the "Asset Purchase
Agreement") by and among the Company and Veeder-Root Service Company.
2. CESSATION OF BUSINESS.
After the Effective Date, the Company shall not engage in any business
activities except for the purposes of (i) preserving the values of its assets,
(ii) winding up its business affairs, including without limitation, the
consummation of a sale or sales in one or a series of transactions of the
remaining assets of the Company, and (iii) making the Liquidation Distribution
(as hereinafter defined) in accordance with the Plan. The Board of Directors of
the Company (the "Board") and, at their pleasure, the officers, shall continue
in office solely for these purposes.
3. DISSOLUTION.
As promptly as practicable after the Effective Date, after winding up
the affairs of the Company and upon filing the Certificate of Election to Wind
Up and Dissolve and a Certificate Dissolution with the Secretary of State of the
State of California, the Company shall be dissolved in accordance with the
California General Corporation Law.
4. LIQUIDATION OF ASSETS.
Commencing upon the Effective Date, the Company shall collect, sell,
exchange or otherwise dispose of all of its property and assets in one or more
transactions, including the property received pursuant to the consummation of
the Asset Purchase Agreement, upon such terms and conditions and for such
consideration, which may consist in whole or in part of money or other property,
as the Board deems expedient and in the best interests of the Company and the
holders of the Company's Series A Preferred Stock (the "Preferred Stockholders")
and Common Stock (the "Common Stockholders"). The Preferred Stockholders and the
Common Stockholders are sometimes hereinafter referred to as the "Stockholders".
In connection with such collection, sale, exchange and other disposition, the
Company shall marshal its assets and
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collect or make provision for the collection of all accounts receivable, debts
and claims owing to the Company. The Company shall have continuing authority to
sell, lease exchange or otherwise convert to cash all or any part of its assets
in accordance with the terms and provisions of this Plan, and to make such
arrangements with respect to employee compensation as may be advisable.
5. PAYMENT OF DEBTS.
The Company shall pay or make provision for the payment of all known or
ascertainable liabilities of and claims upon the Company, including all amounts
estimated by the Board to be necessary for the payment of estimated expenses,
taxes, and contingent liabilities (including expenses of dissolution,
liquidation, and termination of existence, and the Liquidation Distribution),
all as provided pursuant to Section [1905] of the California General Corporation
Law.
6. LIQUIDATING DISTRIBUTION.
The Company shall distribute (i) first, pro rata to the Preferred
Stockholders, all its remaining property and assets, if any, including the
proceeds of any sale, exchange or disposition, except such property or assets as
are required for paying or making provision for the claims and obligations of
the Company in an amount equal to the aggregate amount of the liquidation
preference of the Preferred Stock as of the Record Date, as such liquidation
preference is determined in accordance with the Certificate of Determination of
Rights and Preferences of Preferred Shares as filed with the Secretary of State
of the State of California, and then, if there are any assets remaining after
all such distributions to Preferred Stockholders, (ii) pro rata to the Common
Stockholders (the "Liquidating Distribution"). The Liquidating Distribution may
occur all at one time or in a series of distributions and may be in cash or in
kind, in such manner, and at such time or times before and/or after the Record
Date (as defined below), as the Board, in its absolute discretion, may
determine. If and to the extent deemed necessary, appropriate or desirable by
the Board, in its absolute discretion, the Company may establish and set aside a
reasonable amount (the "Contingency Reserve") to satisfy claims against the
Company and all expenses of the sales of the Company's property and assets, of
the collection and defense of the Company's property and assets, and of the
liquidation and dissolution provided for in this Plan. The Contingency Reserve
may consist of cash or property.
7. REDEMPTION AND CANCELLATION OF PREFERRED STOCK AND COMMON
STOCK.
The Liquidating Distribution shall be in complete redemption and
cancellation of all of the outstanding Preferred Stock and Common Stock of the
Company. The Company shall close its stock transfer books at the close of
business on the record date fixed by the Board for the first or any subsequent
installment of any Liquidating Distribution as the Board in its absolute
discretion may determine (the "Record Date"), and thereafter certificates
representing Preferred Stock and Common Stock shall not be assignable or
transferable on the books of the Company except by will, in testate succession
or operation of law. The Preferred Stockholders and Common Stockholders shall
surrender stock certificates (or, if so required by the Board in its absolute
discretion, furnish indemnity bonds in case of lost or destroyed certificates)
as a
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condition to their receipt of any Liquidating Distribution immediately following
the Record Date.
8. MISSING STOCKHOLDERS.
If any Liquidating Distribution to a Stockholder cannot be made,
whether because the Stockholder cannot be located, has not surrendered a
certificate evidencing their shares of Preferred Stock or Common Stock as
required hereunder or for any other reason, then the distribution to which such
Stockholder is entitled shall (unless transferred to the Trust established
pursuant to Section 11 hereof) be transferred to and deposited with the state
official authorized by the laws of the State of California to receive the
proceeds of such distribution; such transfer shall comply in all respects with
the laws of the State of California. The proceeds of such distribution shall
thereafter be held solely for the benefit of and for the ultimate distribution
to such Stockholder as the sole equitable owner thereof and shall escheat to the
State of California or be treated as abandoned property in accordance with the
laws of the State of California. In no event shall the proceeds of any such
distribution revert to or become the property of the Company.
9. REVOCATION.
Notwithstanding adoption of the Plan by the Company's Common
Stockholders, Common Stockholders representing a majority of the issued and
outstanding voting interests in the Company may revoke the Plan to the extent
permitted by California law.
10. INDEMNIFICATION.
The Company shall continue to indemnify its offices, directors,
employees and agents in accordance with its Certificate of Incorporation and
Bylaws and any contractual arrangements for actions taken in connection with
this Plan and the winding up of the affairs of the Company and shall indemnify
any liquidating trustees and their agents on similar terms. The Company's
obligations to indemnify such persons may be satisfied out of the assets of the
Trust (as defined below). The Board and the trustees, in their absolute
discretion, are authorized to obtain and maintain insurance for the benefit of
such officers, directors, employees, agents and trustees to the extent permitted
by law.
11. LIQUIDATING TRUST.
If necessary for any reason to complete the liquidation and
distribution of the Company's assets to the Stockholders, the Board may at any
time transfer to a liquidating trust (the "Trust") any remaining assets of the
Company which are held as a reserve for contingent liabilities. The Trust, if
any, will succeed to all of the then remaining assets of the Company, including
such reserve, and any liabilities of the Company. The sole purpose of the Trust
will be to liquidate on terms satisfactory to the liquidating trustee(s) and to
distribute the assets formerly owned by the Company, if any, after paying any
remaining liabilities of the Company to the Stockholders.
The Board is authorized to appoint one or more individuals or corporate
persons to act as trustee or trustees of the Trust and to cause to enter into a
liquidating trust agreement with such trustee or trustees on such terms and
conditions as the Board determines. Adoption of the Plan
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will constitute the approval of the Stockholders of any such appointment and
liquidating trust agreement.
12. COSTS.
The Board is authorized, empowered and directed to pay all legal,
accounting, printing, appraisal and other fees and expenses of persons rendering
services to the Company in connection with the sale of its assets, the Plan and,
if appointed, such expenses of a liquidating trustee or trustees.
13. AUTHORIZATION.
Adoption of the Plan by the Stockholders shall constitute full and
complete authority to the proper officers of the Company, without further
Stockholder action (except for any further Stockholder or Board approval
required by law), to do and perform any and all acts and to make, execute and
deliver any and all agreements, conveyances, assignments, transfers,
certificates and other documents of every kind and character which such officers
deem necessary or appropriate to carry out the provisions of the Plan.
14. POWER OF THE BOARD OF DIRECTORS.
The Board and, if authorized by the Board, the officers, shall have
authority to do or authorize any and all acts and things as provided for in the
Plan and any and all such further acts and things as they may consider desirable
to carry out the purpose of the Plan, including the execution and filing of all
other documents which may be necessary or appropriate to implement the Plan. The
Board, to the extent permitted by law, may authorize such variations from or
amendments to the provisions of the Plan as may be necessary or appropriate to
effectuate the complete liquidation and dissolution of the Company, and the
distribution of its assets, if any, to its Stockholders in accordance with the
California General Corporation Law. The death, resignation, or other disability
of any director or officer of the Company shall not impair the authority of the
surviving or remaining director(s) or officer(s) to exercise any of the powers
provided for in the Plan. Upon such death, resignation, or other disability, the
surviving or remaining directors, or if there be none, to the extent permitted
by law, the surviving or remaining officer(s) shall have authority to fill the
vacancy or vacancies so created, but the failure to fill such vacancy or
vacancies shall not impair the authority of the surviving or remaining
director(s) or officer(s) to exercise any of the powers provided for in the
Plan. In connection with and for the purpose of implementing and assuring
completion of this Plan, the Company may, in the absolute discretion of the
Board, pay to the Company's officers, directors and employees, or any of them,
compensation or additional compensation above their regular compensation, in
money or other property, in recognition of the extraordinary efforts they, or
any of them, will be required to undertake, or actually undertake, in connection
with the successful implementation of this Plan. Adoption shall constitute the
approval of the Stockholders of the payment of any such compensation.
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ANNEX D
EXECUTION COPY
GUARANTY
THIS GUARANTY ("Guaranty") is made jointly and severally as of July 21,
2000, by Sagaponack Partners, L.P., a Delaware limited partnership having a
principal business address of 536 Pacific Avenue, San Francisco, California
94133 ("Sagaponack I"), and Sagaponack International Partners, L.P., a Cayman
Islands exempted limited partnership having a principal business address of c/o
Citco Trust, P.O. Box 31106 SMB Corporate Center Windward One, West Bay Road,
Grand Cayman, Cayman Islands ("Sagaponack II") (collectively the two Sagaponack
entities being the "Guarantors"), in favor of Veeder Root Service Company, a
Delaware corporation ("Veeder"), and its officers, directors, employees,
stockholder, assigns, successors and affiliated companies, including without
limitation Danaher Corporation, a Delaware corporation (collectively with
Veeder, the "Indemnified Parties"). Capitalized terms not defined herein shall
have the meanings given such terms in the Purchase Agreement.
RECITALS
A. Sagaponack I and Sagaponack II are the record and beneficial owner of a
majority of the shares of common stock of USTMAN Technologies, Inc, a Delaware
corporation ("Ustman"). Guarantors are the sole holders of the Series A
Preferred Stock of Ustman, which Series A Preferred Stock had an allocation
amount for purposes of liquidation priority and dividends of $17,230,285 as of
March 31, 2000.
B. Pursuant to an Asset Purchase Agreement of even date herewith (the "Purchase
Agreement"), Ustman intends to sell and Veeder intends to purchase substantially
all of the assets of Ustman for $17,350,000.
C. Guarantors will be directly and materially benefited by the consummation of
the transactions contemplated by the Purchase Agreement.
D. As a condition to Veeder's obligation to consummate the transactions
contemplated by the Purchase Agreement, Guarantors are required to execute and
deliver this Guaranty.
E. In order to induce Veeder to consummate the transactions contemplated by the
Purchase Agreement, Guarantors agree to jointly and severally execute and
deliver this Guaranty on the terms and conditions contained herein.
NOW THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, Guarantors hereby covenant and
agree with the Indemnified Parties as follows:
1. If Ustman shall default in the payment when due of any amount due to
any of the Indemnified Parties under Article 8 of the Purchase Agreement, and no
funds under the Holdback are available to make such payment, Guarantors, jointly
and severally, shall forthwith on demand by Veeder unconditionally pay to Veeder
on behalf of the Indemnified Party in
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immediately available funds by wire transfer to an account identified by Veeder
an amount equal to the amount payable by Ustman up to an aggregate maximum of
One Million Five Hundred Thousand and 00/100 U.S. Dollars ($1,500,000.00);
provided however that from and after April 1, 2002, the maximum aggregate
obligation of the Guarantors hereunder shall not exceed one half of the
previously unused portion of the guaranty obligation of Guarantors under this
Guaranty. Guarantors agree to make such full payment irrespective or whether or
not any one or more of the following events occurred: (i) an Indemnified Party
has made any demand on any obligor (other than Ustman) or guarantor of any of
the obligations of Ustman under the Purchase Agreement; (ii) an Indemnified
Party has taken any action of any nature against Ustman or any other obligor or
guarantor of any of the obligations of Ustman under the Purchase Agreement;
(iii) an Indemnified Party has pursued any rights which it has against any other
person or entity who may be liable for the obligations of Ustman under the
Purchase Agreement; or (iv) an Indemnified Party holds or has resorted to any
security for the obligations of Ustman under the Purchase Agreement (except to
the Holdback).
2. Guarantors shall not be exonerated or discharged nor shall their
liability be affected by any forbearance, whether as to payment, time,
performance or otherwise howsoever, or by any other indulgence being given to
Ustman or by any variation of the terms of the Purchase Agreement or by any act,
thing, omission or means whatsoever which, but for this provision, might operate
to exonerate or discharge Guarantors from their obligations under the this
Guaranty.
3. To induce Veeder to enter into the Purchase Agreement and consummate
the transactions contemplated thereby, Guarantors jointly and severally make the
following representations and warranties to Veeder:
(a) each Guarantor is a partnership duly formed, validly
existing and in good standing under the laws of its jurisdiction of formation.
Each Guarantor has the requisite power and authority to own, operate or lease
its properties and to carry on its business as it is now being conducted, and is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction in which the nature of its business or the properties owned,
operated or leased by it makes such qualification, licensing or good standing
necessary;
(b) each Guarantor and each of their representatives signing
this Guaranty have the full legal right and all requisite corporate power and
authority to execute and deliver this Guaranty and to perform its obligations
pursuant to the terms of this Guaranty. The execution and delivery of this
Guaranty by each of the Guarantors and the performance by each of the Guarantors
of the obligations hereunder have been duly and validly authorized by the
general partner of each Guarantor and no other partnership proceedings on the
part of either Guarantor is necessary to authorize or approve the Guaranty or to
perform the obligations contemplated hereby;
(c) the execution and delivery of this Guaranty and the
performance of Guarantors' obligations hereunder will not:
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(i) conflict with, or result in a breach or violation
of any provision of the Certificate of Limited Partnership or Limited
Partnership Agreement of either Guarantor;
(ii) conflict with, result in a breach of, constitute
a default (or an event that with notice or lapse of time or both could become a
default) under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any note, contract, lease, sublease, license, sublicense,
franchise, permit, indenture, agreement or mortgage for borrowed money,
instrument of indebtedness, Security Interest or other arrangement to which
either Guarantor is a party or by which either Guarantor is bound;
(iii) result in the creation or imposition of any
Lien on any of the assets of either Guarantor, pursuant to (A) any law or
regulation to which Guarantor or any of its property is subject, or (B) any
judgment, litigation, order or decree to which Guarantor is bound or any of its
property is subject;
(iv) violate any constitution, statute, law,
ordinance, rule, regulation, decree, order, injunction, judgment, ruling, charge
or other restriction of any Governmental Entity to which either Guarantor is
subject or by which either Guarantor is bound; or
(v) require either Guarantor to file with or to
obtain the permission, authorization, consent or approval of any Governmental
Entity or give any Governmental Entity the right to challenge any of the
transactions contemplated by the Purchase Agreement;
(d) each Guarantor has heretofore delivered to Veeder true,
complete and correct copies of (A) such Guarantor's audited consolidated balance
sheets, statements of income, and cash flow for the fiscal years ended December
31, 1998, and December 31, 1999, and (B) such Guarantor's unaudited consolidated
balance sheets, statements of income and cash flow for the three month period
ended March 31, 2000 (the items in the foregoing (A) and (B) being collectively,
the "Guarantors Financial Statements"). The Guarantors Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP
consistently applied, and fairly present the financial condition of each
Guarantor, as applicable. Since the dates of the Guarantors Financial
Statements, there have been no material changes in Guarantor's accounting
policies;
(e) (i) no other agreement, representation or special
condition exists between any Guarantor and Ustman regarding the liability of any
Guarantor hereunder, nor does any understanding exist between any Guarantor and
Ustman that the obligations of Guarantors hereunder are or will be other than as
set forth herein; and (ii) as of the date hereof, Guarantors have no defense
whatsoever to any action or proceeding that may be brought to enforce this
Guaranty.
(f) all tax returns required to have been filed by either
Guarantor have been timely filed and payment has been made or will have been
made prior to the date upon which any penalty or fine may be imposed; all taxes
which have or may become due pursuant to said returns or pursuant to assessments
received have been paid, except to the extent that such taxes
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are being contested in good faith by appropriate proceedings diligently
conducted and for which such reserves or other appropriate provisions, if any,
as shall be required by generally accepted accounting principles ("GAAP") shall
have been made; and
(g) each Guarantor is solvent as of the date hereof; and after
giving effect to the transactions contemplated by this Guaranty, Guarantor will
be solvent.
4. Until all indemnification obligations of Ustman under the Purchase
Agreement which are guaranteed hereunder expire or are satisfied in full,
Guarantors waive and agree not to enforce any claim, right or remedy of any kind
that Guarantors may now have or hereafter acquire against any Indemnified Party,
whether or not any such claim, right or remedy arises in equity, under contract,
by statute or otherwise. Guarantors acknowledge that they will receive direct
and indirect benefits from the transactions contemplated by the Purchase
Agreement and that the waivers set forth in this Paragraph are knowingly made in
contemplation of such benefits.
5. Guarantors waive promptness and diligence by the Indemnified Parties
with respect to their respective right under the Purchase Agreement and the
Ancillary Documents, including without limitation, this Guaranty.
6. Guarantors waive any and all notice with respect to: (i) the
provisions of the Purchase Agreement or any of the Ancillary Documents; and (ii)
any default in connection with the obligations of Ustman under the Purchase
Agreement.
7. Guarantors waive any rights of presentment, demand, notice of
dishonor or nonpayment, protest and notice of protest in connection with the
obligations of Ustman under the Purchase Agreement.
8. Guarantors agree that the Indemnified Parties may from time to time,
whether before or after the occurrence of any breach of any obligation under the
Purchase Agreement, and as many times as the Indemnified Parties, in their sole
discretion, deem appropriate, do any of the following without notice to
Guarantors and without adversely affecting the validity or enforceability of
this Guaranty: (i) release, surrender, exchange, compromise, or settle any claim
for indemnification or breach of any obligation under the Purchase Agreement;
(ii) change, renew or waive the terms of the Purchase Agreement; (iii) grant any
extension or indulgence with respect to the payment or performance of any
obligation under the Purchase Agreement or any of the Ancillary Documents; (iv)
enter into any agreement or forbearance with respect to any claim for
indemnification or breach of any obligation under the Purchase Agreement; or (v)
sell, release, surrender, exchange or compromise any security held by the
Indemnified Parties for any of the obligations of Ustman under the Purchase
Agreement; provided, however, that notwithstanding the foregoing, the
Indemnified Parties may not waive or release the primary obligation of Ustman as
indemnitor under the Purchase Agreement nor waive or release the Indemnified
Parties recourse to the Holdback under the Purchase Agreement for payout of any
indemnity obligation. Guarantors agree that the Indemnified Parties may do any
of the above, and upon such terms and conditions, as the Indemnified Parties
deems necessary or advisable, in their sole discretion, in each case without
giving any notice to Guarantors, and that Guarantors
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will remain liable for full payment of Ustman's indemnification obligations
guaranteed hereunder.
9. This Guaranty shall be a continuing guaranty and indemnity and shall
continue in full force and effect until all indemnification obligations of
Ustman arising, and all monies owing or payable by Ustman in respect of
indemnification obligations, under the Purchase Agreement have been paid,
discharged or satisfied in full or have expired and notwithstanding any
insolvency of Ustman as the case may be or any change in the status of Ustman.
Notwithstanding the foregoing sentence, this Guaranty shall expire on April 1,
2003 except as to indemnification claims raised by an Indemnified Party under
the Purchase Agreement prior to April 1, 2003.
10. Guarantors agree that no failure or delay on the part of the
Indemnified Parties to exercise any of their rights, powers or privileges under
this Guaranty shall be a waiver if such rights, powers or privileges or a waiver
of any default, nor shall any single or partial exercise of any of the
Indemnified Parties' rights, powers or privileges preclude other or further
exercise thereof or the exercise of any other right, power or privileges or be
construed as a waiver of any default. Guarantors further agree that no waiver or
modification of any rights of the Indemnified Parties under this Guaranty shall
be effective unless in writing and signed by Veeder. Guarantors further agree
that each written waiver shall extend only to the specific instance actually
recited in such written waiver and shall not impair the rights of the
Indemnified Parties in any other respect.
11. Guarantors unconditionally agree to pay all costs and expenses,
including attorney's fees and expenses, incurred by the Indemnified Parties in
enforcing this Guaranty against Guarantors.
12. Guarantors hereby covenant and agree that, from the date hereof and
until all of the indemnification obligations of Ustman under the Purchase
Agreement paid and performed in full and all obligations hereunder shall have
been performed and discharged, it will comply with each of the following
covenants:
(a) each of the Guarantors shall maintain its existence and
its license or qualification and good standing in each jurisdiction in which the
failure to be licensed or qualified could result in a Material Adverse Effect;
(b) each Guarantor shall duly pay and discharge all material
liabilities to which it is subject or which are asserted against it, prior to
the date when any fine, late charge or other penalty for late payment may be
imposed, except to the extent that such liabilities are being contested in good
faith and by appropriate and lawful proceedings diligently conducted and for
which such reserve or other appropriate provisions, if any, as shall be required
by GAAP shall have been made;
(c) neither Guarantor shall sell, transfer or assign any
material part of its assets unless such assets so sold, transferred or assigned
are replaced with assets of equal or greater value (it being understood that
neither Guarantor shall be prohibited from making
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distributions to its partners as required under its respective partnership
agreement so long as the Guarantors collectively maintain throughout the
duration of their obligations under this Guaranty a reserve in respect of such
obligations consisting of cash or cash equivalents in the amount of such
obligations, net assets of Two Hundred percent (200%) of such obligations, or a
combination of both) and it shall not liquidate, dissolve, consolidate or merge
with or into any other corporation, limited liability company, partnership or
other entity to consolidate or merge with or into it; and
(d) each Guarantor shall insure its properties and assets
against loss or damage by fire and such other insurable hazards as such assets
are commonly insured (including business interruption insurance) and in such
amounts as similar properties and assets are insured by prudent companies or
individuals in similar circumstances carrying on similar businesses and against
public liability for damages and against other risks in amounts normally carried
by prudent companies or individuals carrying on similar businesses.
13. Guarantors agree that this Guaranty and the rights and obligations
of the parties hereto shall for all purposes be governed by and construed and
enforced in accordance with the substantive laws of the State of Delaware
without giving effect to its principles of conflicts of laws.
14. Guarantors recognize that this Guaranty, when executed, constitutes
a sealed instrument and as a result the instrument will be enforceable as such
without regard to any statute of limitations which might otherwise be applicable
and without any consideration.
15. Guarantors acknowledge that, at the time of execution of this
Guaranty, Buyer offered to Guarantors a copy of this Guaranty in the form in
which it was executed and that by acknowledging this fact, Guarantors may not
later be able to claim that a copy of the Guaranty was not received by them.
16. Guarantors agree that this Guaranty shall be binding upon
Guarantors, their successors and assigns, provided, however, that Guarantors may
not assign or transfer any of Guarantors' rights and obligations hereunder or
any interest herein. A change in control of a majority of the partnership
interests in either Guarantor shall in no way impair or affect this Guaranty.
Guarantors further agree that this Guaranty is freely assignable and
transferable by the Indemnified Parties in connection with any assignment or
transfer of the Business.
17. Guarantors agree that the enumeration of the Indemnified Parties'
rights and remedies set forth in this Guaranty is not intended to be exhaustive
and the exercise by the Indemnified Parties of any right or remedy shall not
preclude the exercise of any other rights or remedies, all of which shall be
cumulative and shall be in addition to any other right or remedy given hereunder
or under any other agreement among the parties to the Purchase Agreement or
which may now or hereafter exist at law or in equity or by or otherwise.
18. Guarantors agree that all notices, statements, request, demands and
other communications under this Guaranty shall be given to Guarantors at the
address set forth below in the manner provided in Article 10 of the Purchase
Agreement:
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Sagaponack Partners, L.P.
536 Pacific Avenue
San Francisco, California 94133
Attention: Barry S. Rosenstein
Fax No.: (415) 989-8001
with a required copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Marc Weingarten, Esq.
Fax: (212) 593-5955
19. (a) Guarantors agree that the provisions of this Guaranty are
severable, and in an action or proceeding involving any state or federal
bankruptcy, insolvency or other law affecting the rights of creditors generally:
(i) if any clause or provision shall be held invalid
or unenforceable in whole or in part in any jurisdiction, then such invalidity
or unenforceability shall affect only such clause or provision, or part thereof,
in such jurisdiction and shall not in any manner affect such clause or provision
in any other jurisdiction, or any other clause or provision in this Guaranty in
any jurisdiction; and
(ii) if this Guaranty would be held or determined to
be void, invalid or unenforceable on account of the amount of Guarantors'
aggregate liability under this Guaranty, then, notwithstanding any other
provision of this Guaranty to the contrary, the aggregate amount of such
liability shall be automatically limited and reduced to the highest amount which
is valid and enforceable as determined in such action or proceeding:
(b) If this Guaranty is held or determined to be void, invalid
or unenforceable, in whole or in part, such holding or determination shall not
impair or affect the validity and enforceability of any clause or provision not
so held to be void, invalid or unenforceable.
20. GUARANTORS HEREBY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY
WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR
IN CONNECTION WITH THIS GUARANTY. GUARANTORS (i) CERTIFY THAT NO REPRESENTATIVE,
AGENT OR ATTORNEY OF VEEDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
PARTY WOULD NOT SEEK TO ENFORCE THE WAIVERS SET FORTH IN THIS GUARANTY, AND (II)
ACKNOWLEDGE THAT THE ENTERING INTO OF THE PURCHASE AGREEMENT BY VEEDER HAS BEEN
INDUCED BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS SET FORTH IN THIS
GUARANTY. GUARANTORS FURTHER ACKNOWLEDGE THAT THEY HAVE BEEN REPRESENTED (OR
HAVE HAD THE OPPORTUNITY TO BE
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REPRESENTED) IN THE SIGNING OF THIS GUARANTY AND IN THE MAKING OF THE WAIVERS
HEREIN CONTAINED BY INDEPENDENT LEGAL COUNSEL, SELECTED OF THEIR OWN FREE WILL,
AND HAVE HAD THE OPPORTUNITY TO DISCUSS THE SAME WITH COUNSEL.
21. Guarantors (i) hereby irrevocably submit to the nonexclusive
jurisdiction of the State of Delaware, and to the nonexclusive jurisdiction of
the United States District Court for the District of Delaware, or any successor
to said court (hereinafter referred to as the "Delaware Courts") for purposes of
any suit, action or other proceeding which relates to this Guaranty, (ii) to the
extent permitted by applicable law, hereby waives and agrees not to assert by
way of motion, as a defense or otherwise in any such suit, action or proceeding,
any claim that Guarantors are not personally subject to the jurisdiction of the
Delaware Courts; that such suit, action or proceeding is brought in an
inconvenient forum; that the venue of such suit, action or proceeding is
improper; or that this Guaranty may not be enforced in or by the Delaware
Courts, (iii) hereby agree not to seek, and hereby waive, any collateral review
by any other court, which may be called upon to enforce the judgment of any of
the Delaware Courts, of the merits of any such suit, action or proceeding or the
jurisdiction of the Delaware Courts, and (iv) waive personal service of any and
all process upon it and consents that all such service of process be made by
certified or registered mail addressed as provided in Paragraph 19 hereof and
service so made shall be deemed registered mail addressed as provided in
Paragraph 19 hereof and service so made shall be deemed to be completed upon
actual receipt thereof. Nothing herein shall limit Veeder's right to bring any
suit, action or other proceeding against Guarantors or any of Guarantors' assets
or to serve process on Guarantors by any means authorized by law.
[signatures on following page]
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IN WITNESS WHEREOF, the Guarantors have caused this Guaranty to be
executed as of the date first above written.
SAGAPONACK PARTNERS, L.P.
By: RSP Capital, L.L.C.
Dated: By: /s/ Barry S. Rosenstein
----------------- -------------------------------
Name: Barry S. Rosenstein
Title: Managing Member
SAGAPONACK INTERNATIONAL PARTNERS, L.P.
By: RSP Capital, L.L.C.
Dated: By: /s/ Barry S. Rosenstein
----------------- -------------------------------
Name: Barry S. Rosenstein
Title: Managing Member
D-9
