As filed with the Securities and Exchange Commission on April 7, 1998.
Registration No. 333-
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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AETRIUM INCORPORATED
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1439182
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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2350 HELEN STREET
NORTH ST. PAUL, MINNESOTA 55109
(612) 704-1800
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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DARNELL L. BOEHM
CHIEF FINANCIAL OFFICER AND SECRETARY
2350 HELEN STREET
NORTH ST. PAUL, MINNESOTA 55109
(612) 704-1800
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Copies to:
Thomas C. Thomas, Esq.
Oppenheimer Wolff & Donnelly LLP
3400 Plaza VII
45 South Seventh Street
Minneapolis, Minnesota 55402
(612) 607-7000
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Approximate date of commencement of proposed sale to the public:
From time to time after the effective date of this Registration Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT PRICE REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value...... 900,000 Shares $15.125(2) $13,612,500(2) $4,124.59
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</TABLE>
(1) The amount to be registered hereunder consists of 900,000 shares of
Common Stock to be sold by certain selling shareholders.
(2) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of
1933, based upon the average of the high and low sales prices of the
registrant's Common Stock on April 1, 1998, as reported by the Nasdaq
National Market.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH
DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE SECURITIES IN
ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO
REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION DATED APRIL 7, 1998
PROSPECTUS
900,000 SHARES
AETRIUM INCORPORATED
COMMON STOCK
-----------------------
This Prospectus relates to 900,000 shares of Common Stock, par value
$0.001 per share (the "Common Stock"), of Aetrium Incorporated (the "Company"),
that may be offered for sale for the account of certain shareholders of the
Company as stated herein under the heading "Selling Shareholders." The shares
being offered by the Selling Shareholders hereunder include 900,000 shares of
outstanding Common Stock issued to the Selling Shareholders in a private
transaction in connection with the purchase by the Company of substantially all
of the rights, title and interest in the assets of, and the assumption of
certain liabilities of the equipment division of WEB Technology, Inc., pursuant
to an Asset Purchase Agreement dated as of March 20, 1998 (the "Purchase
Agreement"), completed on April 1, 1998.
The Selling Shareholders have advised the Company that sales of the
shares offered hereunder by them or by their respective pledgees, donees,
transferees or other successors in interest, may be made from time to time on
the Nasdaq National Market, in the over the counter market, in ordinary
brokerage transactions, in negotiated transactions, or otherwise, at market
prices prevailing at the time of the sale or at negotiated prices. See "Plan of
Distribution."
The Selling Shareholders and any broker-dealers or other persons
acting on their behalf in connection with the sale of Common Stock hereunder may
be deemed to be an "underwriter" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), and any commissions received by the
Selling Shareholders and any profit realized by them on the resale of Common
Stock as principals may be deemed to be underwriting commissions under the
Securities Act. As of the date hereof, there are no special selling arrangements
between any broker-dealer or other person and any of the Selling Shareholders.
The Company will not receive any part of the proceeds of any sales
of shares pursuant to this Prospectus. Pursuant to the terms of the Purchase
Agreement, the Company will pay all the expenses of registering the shares,
except for selling expenses incurred by the Selling Shareholders in connection
with this offering, including any fees and commissions payable to broker-dealers
or other persons, which will be borne by the Selling Shareholders. In addition,
the Purchase Agreement provides for certain other usual and customary terms,
including indemnification by the Company of the Selling Shareholders against
certain liabilities arising under the Securities Act.
THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE CERTAIN RISKS. SEE
"RISK FACTORS" BEGINNING ON PAGE 6 OF THIS PROSPECTUS.
The Company's Common Stock is traded on the Nasdaq National Market
under the symbol "ATRM". On April 1, 1998, the last sale price of the Common
Stock on the Nasdaq National Market was $15.375 per share.
-----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------------
THE DATE OF THIS PROSPECTUS IS ______________, 1998.
<PAGE>
No person has been authorized to give any information or to make any
representations not contained or incorporated by reference in this Prospectus in
connection with the offer described in this Prospectus and, if given or made,
such information and representations must not be relied upon as having been
authorized by the Company or the Selling Shareholders. Neither the delivery of
this Prospectus nor any sale made under this Prospectus will under any
circumstances create any implication that there has been no change in the
affairs of the Company since the date hereof or since the date of any documents
incorporated herein by reference. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any securities other than the
securities to which it relates, or an offer or solicitation in any state to any
person to whom it is unlawful to make such offer in such state.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company pursuant to the Exchange
Act may be inspected and copied at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
also be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. In addition, the Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the Commission's
Web site is http://www.sec.gov.
The Company has filed with the Commission a Registration Statement
on Form S-3 under the Securities Act of 1933, as amended (the "Securities Act").
This Prospectus does not contain all of the information, exhibits and
undertakings set forth in the Registration Statement, certain portions of which
are omitted as permitted by the Rules and Regulations of the Commission. Copies
of the Registration Statement and the exhibits are on file with the Commission
and may be obtained, upon payment of the fee prescribed by the Commission, or
may be examined, without charge, at the offices of the Commission set forth
above. For further information, reference is made to the Registration Statement
and its exhibits.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company
(File No. 0-22166) are incorporated by reference in this Prospectus: (1) the
Company's Annual Report on Form 10-K for the year ended December 31, 1997; (2)
all other reports filed by the Company pursuant to Sections 13(a) or 15(d) of
the Exchange Act since December 31, 1997; and (3) the description of the
Company's Common Stock contained in its Registration Statement on Form 8-A and
any amendments or reports filed for the purpose of updating such description.
All documents filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the offering hereunder will be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document all or any portion of which is incorporated or deemed to be
incorporated by reference herein will be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other
<PAGE>
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded will not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a
copy of this Prospectus is delivered, upon written or oral request of such
person, a copy of any or all of the documents referred to above which are
incorporated by reference in this Prospectus (other than exhibits to such
documents unless such exhibits are specifically incorporated by reference into
the information that this Prospectus incorporates). Requests should be directed
to Aetrium Incorporated, 2350 Helen Street, North St. Paul, Minnesota 55109,
Attention: Lee A. Schafer; telephone (612) 704-1800.
<PAGE>
THE COMPANY
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS. FOR
THIS PURPOSE, ANY STATEMENTS CONTAINED IN THIS PROSPECTUS THAT ARE NOT
STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS.
WITHOUT LIMITING THE FOREGOING, WORDS SUCH AS "MAY," "WILL," "EXPECT,"
"BELIEVE," "ANTICIPATE," "ESTIMATE" OR "CONTINUE" OR THE NEGATIVE OR OTHER
VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL
RISKS AND UNCERTAINTIES, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A
VARIETY OF FACTORS, INCLUDING THOSE DESCRIBED UNDER THE CAPTION "RISK FACTORS."
GENERAL
Aetrium Incorporated (the "Company") designs, manufactures and
markets a variety of electromechanical equipment used in the handling and
testing of microelectronic components, including semiconductor devices known as
integrated circuits ("ICs") and other forms of electronic components. The
Company's primary focus is on high volume electronic component types and on the
latest package designs. The Company's products are purchased primarily by
semiconductor manufacturers and are used in the "back-end" of semiconductor
manufacturing processes. The Company's products automate critical functions to
improve manufacturing yield, raise quality levels, reduce manufacturing costs
and increase product reliability.
The Company has three principal product lines. The largest, in terms
of revenue, is its broad line of test handlers, which incorporate thermal
conditioning, contactor and automated handling technologies to provide automated
handling of ICs and other electronic components during production test cycles.
Test handler products are primarily produced by the Company's North St. Paul,
San Diego, and Aetrium FSA divisions. Change kits to adapt the Company's test
handlers to different IC package configurations and to upgrade installed
equipment for enhanced performance also represent a significant part of the
Company's revenue. The Company's second product line consists of its IC
Automation Products, which are produced by the North St. Paul Division. These
products are sold to original equipment manufacturers ("OEMs") to incorporate as
the automated handling components of such OEM's own proprietary equipment for a
variety of other IC processing requirements, such as marking, lead scanning, and
lead trim and form. The Company's third product line is specialty test
equipment, which include reliability test equipment and environmental test
equipment. The Company's reliability test systems provide IC manufacturers with
IC performance data to aid in the evaluation and improvement of IC designs and
manufacturing processes to increase IC yield and reliability and are produced in
North St. Paul, Minnesota. The Company's environmental test equipment products
provide burn-in testing of ICs and are produced in the Company's Lawrence
Division.
The Company was incorporated in Minnesota in December 1982. The
Company's executive offices are located at 2350 Helen Street, North St. Paul,
Minnesota 55109, and its telephone number is (612) 704-1800.
RECENT DEVELOPMENTS
Pursuant to an Asset Purchase Agreement dated as of March 20, 1998
(the "Purchase Agreement"), the Company, through its wholly-owned subsidiary,
Aetrium-WEB Technology, L.P., purchased substantially all of the rights, title
and interest in the assets of, and assumed certain liabilities of the equipment
division of WEB Technology, Inc., a Delaware corporation ("WEB"), on April 1,
1998. The total consideration paid by the Company for the assets of WEB was
$7,835,000 ($500,000 of which
<PAGE>
will be paid no later than June 30, 1998, subject to any post-closing adjustment
to the purchase price) and 900,000 shares of Common Stock (the "Acquired
Shares"). Pursuant to the terms of the Purchase Agreement, the Company
distributed the Acquired Shares to the shareholders of WEB in accordance with
their proportionate ownership interests. The Company granted the Selling
Shareholders a one-time demand registration right pursuant to which the shares
offered hereby have been registered. Under the terms of the Purchase Agreement,
the Selling Shareholders are restricted from selling any of the Acquired Shares
during the period that commences on the seventh day of the last month of each of
the Company's fiscal quarters and ends on the third business day after the
Company releases financial results for such quarter. Additionally, certain
Selling Shareholders are further restricted from selling any of the Acquired
Shares held by such Selling Shareholders under a Right of First Refusal
Agreement with the Company pursuant to which such Selling Shareholders agreed to
provide a right of first refusal to the Company on any sale of such Selling
Shareholders' Acquired Shares until March 31, 2000.
RISK FACTORS
The following risk factors relating to the Company should be
considered in evaluating an investment in the Common Stock.
DEPENDENCE ON SEMICONDUCTOR INDUSTRY
The Company is in the business of supplying capital equipment to the
manufacturers of integrated circuits and other electronic components within the
semiconductor industry. This industry has been subject to significant market
fluctuations and periodic downturns. Often these developments have had a
disproportionate effect on capital equipment suppliers. The Company has
developed and acquired product lines for the semiconductor market segments which
it feels provide favorable growth opportunities and, accordingly, the Company's
business is most sensitive to market fluctuations in those specific segments.
The Company's future financial performance may be materially adversely affected
by market fluctuations in the semiconductor industry in general, and more
particularly by fluctuations in the industry segments within the Company's
primary focus.
MANAGEMENT OF GROWTH
Company sales have increased at an average annual compounded growth
rate of approximately 35% during the period from 1986 through 1997. Since
December 1995, the Company has acquired several businesses and product lines: EJ
Systems in December 1995; Forward Systems Automation in April 1997; the Handler
Division of Advantek, Inc. in October 1997; and the equipment division of WEB
Technology, Inc. in April 1998. The Company's strategy is to continue to grow
its revenue base through product acquisition and development. The Company also
expects increases in demand for its products resulting from general growth in
the semiconductor industry. The Company's ability to manage future growth will
be dependent on its success in assimilating these recent and future
acquisitions. The Company's ability to continue to meet increasing production
requirements and manage future growth will also depend in part on its success in
attracting and retaining additional management and technical personnel at each
of its operating locations. Industry growth and low unemployment rates have
increased the competition for such personnel. If the Company is unable to manage
growth effectively and meet increasing production requirements, customer
confidence could erode and demand for the Company's products could deteriorate,
which could materially and adversely affect the Company's business and operating
results.
<PAGE>
FUTURE ACQUISITIONS
The Company has pursued in the past and continues to pursue
acquisitions of complementary technologies, product lines or businesses. Future
acquisitions by the Company could result in dilutive issuances of equity
securities, and the incurrence of additional debt and amortization expenses
related to goodwill and other intangible assets that could adversely affect the
Company's profitability. In addition, gross profit margins of acquired products,
necessary product or technology development expenditures and other factors that
may be involved in any such acquired business could result in dilution to the
Company's earnings. Acquisitions also may involve numerous other risks,
including difficulties in the assimilation of the operations and products of the
acquired business, dependence on new products and processes, the diversion of
management's attention from other business concerns, risks of entering markets
in which the Company has no or limited direct prior experience, the potential
loss of key employees of the acquired business and difficulties in attracting
additional key employees necessary to absorb added management responsibilities.
No assurance can be given as to the effect of any future acquisition on the
Company's business or operating results.
DEPENDENCE ON NEW PRODUCTS AND PROCESSES
The market for the Company's products is characterized by rapid
technological change and evolving industry standards and is highly competitive
with respect to timely product innovation. The development of more complex ICs
has driven the need for new equipment and processes to produce such devices at
an acceptable cost. The Company believes that its future success will depend in
part upon its ability to anticipate changes in technology, IC package types and
industry standards and to successfully develop and introduce new and enhanced
products on a timely basis. As a result, the Company expects to continue to make
significant investments in research and development and to continue to consider
from time to time the strategic acquisition of businesses, products and
technologies complementary to the Company's business. If the Company is unable
for technological or other reasons to introduce products in a timely manner in
response to changes in the industry or if products or product enhancements that
the Company develops or acquires do not achieve market acceptance, the Company's
business and operating results could be materially and adversely affected.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
The Company's operating results may fluctuate based on factors such
as the cancellation and rescheduling of orders, seasonal fluctuations in
business activity, product announcements by the Company or its competitors, and
changes in pricing policies by the Company, its competitors or its suppliers. If
anticipated shipments in any quarter do not occur or are delayed, expenditure
levels could be disproportionately high, and the Company's operating results for
that quarter would be adversely affected. The Company attempts to maintain a
backlog of orders sufficient to reduce the impact of these factors, but there
can be no assurance that backlog levels will be maintained.
COMPETITION
The markets for the Company's test handlers, IC Automation Products,
and reliability and environmental test systems are highly competitive. Aetrium
competes with a number of companies ranging from very small businesses to large
companies, some of which have substantially greater financial, manufacturing,
marketing and product development resources than the Company. Although the
Company believes its products have competitive advantages over its current
competitors' products, there can be no assurance that the Company will be able
to compete successfully against current and future sources of competition or
that the competitive pressures faced by the Company will not adversely affect
its financial performance.
<PAGE>
CUSTOMER CONCENTRATION
Many of the Company's end user customers purchase through the
Company's international distributors, and one of the Company's international
distributors represented approximately 12% of the Company's 1997 net sales.
Three of the Company's end customers accounted for approximately 18%, 14% and
10%, respectively, of the Company's 1997 net sales. The Company intends to
continue efforts to broaden its base of customers. However, a reduction, delay
or cancellation of orders from one or more of its significant customers, or the
loss of one or more of such customers could have a material adverse effect on
the Company's business and operating results.
<PAGE>
RELIANCE ON THIRD PARTY DISTRIBUTION CHANNELS
The Company markets and sells its test handlers and reliability and
environmental test equipment primarily through third party manufacturers'
representatives and international distributors that are not under the direct
control of the Company. The Company has limited internal sales personnel. A
reduction in the sales efforts by the Company's current manufacturers'
representatives or distributors or termination of their relationships with the
Company could adversely affect the Company's business and operating results.
OEM CUSTOMERS FOR IC AUTOMATION PRODUCTS
The Company markets its IC Automation modules to a number of IC
processing equipment OEMs. The Company's ability to retain its OEM customers and
attract new OEM customers depends on a number of factors, including the changing
needs and financial condition of these customers. Failure of any OEM customer
may not only result in loss of IC Automation product line sales, but also loss
on outstanding receivables due from such OEM.
INTERNATIONAL OPERATIONS
For the years ended December 31, 1995, 1996 and 1997, approximately
47%, 28% and 30%, respectively, of the Company's net sales were derived from
shipments to international customers, and the Company expects that international
sales will continue to account for a significant portion of its net sales. The
Company's international business may be adversely affected by governmental,
political and economic conditions, including tariff regulations, import quotas
and other factors. While foreign sales are priced in dollars, fluctuations in
currency exchange rates may reduce the demand for the Company's products by
increasing the price of the Company's products in the currency of the countries
to which the products are sold.
DEPENDENCE ON SENIOR MANAGEMENT AND KEY EMPLOYEES
The Company's success depends on the performance of its executive
officers and other key personnel. The loss of the services of any of its
executive officers or other key employees could have a material adverse effect
on the Company. The Company's future success will also depend in part upon its
ability to attract and retain highly qualified personnel. The Company has not
purchased key-man life insurance on any of its executive officers or other key
employees and currently does not intend to purchase such insurance.
PROTECTION OF INTELLECTUAL PROPERTY
The Company currently holds several U.S. patents with respect to its
products and technology. There can be no assurance, however, that patents will
be granted in the future or that any patents will be valid or otherwise of value
to the Company. The Company also relies on a combination of copyright,
trademark, trade secret, unfair competition, and other intellectual property
laws, nondisclosure agreements and other protective measures to protect its
rights. Such protection, however, may not preclude competitors from developing
products similar to the Company's products. In addition, the laws of certain
foreign countries do not protect the Company's intellectual property rights to
the same extent as do the laws of the United States. Although the Company
continues to implement protective measures and intends to defend its proprietary
rights vigorously, there can be no assurance that these efforts will be
successful. The Company is not aware of any basis for any infringement claim
against it; however, there
<PAGE>
can be no assurance that third parties will not assert intellectual property
infringement claims against the Company.
DEPENDENCE ON SUPPLIERS
Certain significant components used in the Company's products,
including certain contactor components, printed circuit boards, refrigeration
systems, and vacuum pumps, are currently available only from sole or limited
sources. Although to date the Company has been able to obtain adequate supplies
of these components and maintains inventories of its more critical components,
the Company's inability in the future to develop alternative sources or to
obtain sufficient sole or limited-source components could result in delays or
reductions in product introductions or shipments, which could have a material
adverse effect on the Company's operating results.
VOLATILITY OF STOCK PRICE
The Company's Common Stock has experienced in the past, and could
experience in the future, substantial price volatility as a result of a number
of factors, including quarter to quarter variations in the actual or anticipated
financial results of the Company, announcements by the Company, its competitors
or its customers, government regulations, and developments in the semiconductor
industry. In addition, the stock market has experienced extreme price and volume
fluctuations which have affected the market price of many technology companies
in particular and which have at times been unrelated to the operating
performance of the specific companies whose stock is traded. Broad market
fluctuations, as well as economic conditions generally and in the semiconductor
industry specifically, may adversely affect the market price of the Company's
Common Stock.
ANTI-TAKEOVER PROVISIONS: POSSIBLE ISSUANCE OF PREFERRED STOCK; AUTHORITY TO
DIFFERENTIATE COMMON STOCK
The Company's Restated Articles of Incorporation authorize the
issuance of 2,000,000 shares of undesignated stock (the "Undesignated Stock").
The Company's Board of Directors has the power to issue any or all of the shares
of Undesignated Stock, including the authority to establish the rights and
preferences of the Undesignated Stock, without shareholder approval. In
addition, the Board of Directors has the authority to establish one or more
separate classes or series of Common Stock. Furthermore, as a Minnesota
corporation, the Company is subject to certain "anti-takeover" provisions of the
Minnesota Business Combinations Act. These provisions and the power to issue the
Undesignated Stock and to establish separate classes or series of Common Stock
may, in certain circumstances, deter or discourage takeover attempts and other
changes in control of the Company not approved by management and the Board. As a
result, the Company's shareholders may lose opportunities to dispose of their
shares at the higher prices generally available in takeover attempts or that may
be available under a merger proposal. In addition, these statutory provisions,
the existence of the Undesignated Stock and the Board of Directors' broad
authority with respect to the Common Stock may have the effect of permitting the
Company's current management to retain its position and place it in a better
position to resist changes that shareholders may wish to make if they are
dissatisfied with the conduct of the business.
YEAR 2000 ISSUES
Many existing computer programs use only two digits to identify a
year in the date field, with the result that data referring to the year 2000 and
subsequent years may be misinterpreted by these programs. If present in the
computer applications of the Company or its suppliers and not corrected, this
problem
<PAGE>
could cause computer applications to fail or to create erroneous results and
could cause a disruption in operations and have an adverse effect on the
Company's business and results of operations. The Company has evaluated its
principal computer systems and has determined that they are substantially Year
2000 compliant. The Company has initiated discussions with its key suppliers to
determine whether they have any Year 2000 issues. The Company has not incurred
any material expenses to date in connection with this evaluation, and does not
anticipate material expenses in the future, depending upon the status of its key
suppliers with respect to this issue.
<PAGE>
SELLING SHAREHOLDERS
The following table sets forth certain information, as of April 1,
1998, and as adjusted to reflect the sale of the shares offered hereby, with
respect to the beneficial ownership of the Common Stock by the Selling
Shareholders. None of the Selling Shareholders or their respective affiliates
has held any position or office or maintained any material relationship with the
Company or its predecessors or affiliates over the past three years.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED AFTER
SHARES OF COMMON COMPLETION OF
STOCK BENEFICIALLY NUMBER OF SHARES THE OFFERING(2)
OWNED PRIOR TO THE BEING -----------------------------
SELLING SHAREHOLDERS OFFERING(1) OFFERED NUMBER % OF CLASS (3)
- -------------------- ------------------ ---------------- ------ --------------
<S> <C> <C> <C> <C>
Scott Bensmiller............................... 29,610 29,610 0 *
Arthur and Marla Bloom, JTWOS.................. 22,590 22,590 0 *
Jill Bloom..................................... 19,260 19,260 0 *
Scott Bloom.................................... 19,260 19,260 0 *
Edward Boothman................................ 92,430 92,430 0 *
Jackie Candelier............................... 14,760 14,760 0 *
Carol Carr..................................... 11,790 11,790 0 *
Damon L. Coalson............................... 8,100 8,100 0 *
Brian Cunningham............................... 3,690 3,690 0 *
Edward Etess................................... 99,810 99,810 0 *
Edward Etess & Rebecca Lamont-
Etess, Co-Trustees UAD 9/28/84
Etess Community Property Trust............... 60,570 60,570 0 *
Stanley Droch, Trustee UAD 12/22/83
Estess Children Irrevocable Trust
for the benefit of Lori Ida Etess............ 6,120 6,120 0 *
Lori Ida Etess................................. 2,970 2,970 0 *
Michael H. Etess............................... 14,670 14,670 0 *
John Estridge.................................. 8,370 8,370 0 *
William J. Evans, Jr........................... 30,420 30,420 0 *
Barbra Gerard.................................. 3,690 3,690 0 *
Bart Gilbert................................... 3,780 3,780 0 *
Donna Huff..................................... 7,380 7,380 0 *
Jerry Kelley................................... 7,380 7,380 0 *
Douglas Magde.................................. 720 720 0 *
Hal Preston.................................... 18,000 18,000 0 *
Scott Roberson................................. 3,690 3,690 0 *
Dr. Bahman Teimourian.......................... 49,320 49,320 0 *
John W. Walkoviak.............................. 720 720 0 *
Keith E. Williams.............................. 106,290 106,290 0 *
Karen M. Williams.............................. 123,840 123,840 0 *
Keith E. Williams, Cust Dona Marleen
Williams UGMA TX............................. 41,130 41,130 0 *
Bartholomew E. Williams........................ 41,130 41,130 0 *
Marlys A. Williams............................. 41,130 41,130 0 *
Joel Witt...................................... 7,380 7,380 0 *
</TABLE>
- --------------------------
* Less than one percent (1%)
<PAGE>
(1) The Selling Shareholders possess sole voting and investment power with
respect to the shares shown.
(2) This assumes all shares being offered and registered hereunder are sold,
although the Selling Shareholders are not obligated to sell any shares.
(3) Based upon 9,700,153 shares of Common Stock outstanding as of April 1, 1998.
PLAN OF DISTRIBUTION
The Selling Shareholders have advised the Company that sales of the
shares offered hereunder by them, or by their respective pledgees, donees,
transferees or other successors in interest, may be made from time to time in
the over-the-counter market, through negotiated transactions or otherwise, at
market prices prevailing at the time of sale or at negotiated prices. The shares
may be sold by one or more of the following methods: (a) a block trade in which
the broker or dealer so engaged will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; and (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers.
Sales may be made pursuant to this Prospectus to or through broker-dealers who
may receive compensation in the form of discounts, concessions or commissions
from the Selling Shareholders or the purchasers of Common Stock for whom such
broker-dealer may act as agent or to whom they may sell as principal, or both
(which compensation as to a particular broker-dealer may be in excess of
customary commissions). To the extent required, one or more supplemental
prospectuses will be filed pursuant to Rule 424 under the Securities Act to
describe any material arrangements for the sales of the shares offered hereunder
when such arrangements are entered into by the Selling Shareholders and any
other broker-dealers that participate in the sale of the shares. In addition,
any shares that qualify for sale pursuant to Rule 144 under the Securities Act
may be sold under Rule 144 rather than pursuant to this Prospectus. No period of
time has been fixed within which the shares covered by this Prospectus may be
offered or sold.
The Selling Shareholders and any broker-dealers or other persons
acting on its behalf in connection with the sale of Common Stock hereunder may
be deemed to be an "underwriter" within the meaning of the Securities Act, and
any commissions received by the Selling Shareholders and any profit realized by
them on the resale of Common Stock as principals may be deemed to be
underwriting commissions under the Securities Act. As of the date hereof, there
are no special selling arrangements between any broker-dealer or other person
and any of the Selling Shareholders.
Pursuant to the terms of the Purchase Agreement, the Company will
pay all the expenses of registering the shares offered hereby, except for
selling expenses incurred by the Selling Shareholders in connection with this
offering, including any fees and commissions payable to broker-dealers or other
persons, which will be borne by the Selling Shareholders. In addition, the
Purchase Agreement provides for certain other usual and customary terms,
including indemnification by the Company of the Selling Shareholders against
certain liabilities arising under the Securities Act.
<PAGE>
VALIDITY OF COMMON STOCK
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by Oppenheimer Wolff & Donnelly LLP, Minneapolis,
Minnesota.
EXPERTS
The consolidated financial statements of the Company as of December
31, 1997 and 1996, and for each of the three years in the period ended December
31, 1997, incorporated by reference in this Prospectus have been so included in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The table below sets forth the estimated expenses (except the SEC registration
fee, which is an actual expense) in connection with the offer and sale of the
shares of Common Stock of the registrant covered by this Registration Statement.
SEC registration fee....................................... $ 4,124.59
Fees and expenses of counsel for the Company............... 10,000.00
Fees and expenses of accountants for the Company........... 5,000.00
Miscellaneous.............................................. 5,000.00
----------
*Total................................................ $24,124.59
- -----------------------
* None of the expenses listed above will be borne by the Selling Shareholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Minnesota Statutes Section 302A.521 provides that a Minnesota
business corporation must indemnify any director, officer, employee or agent of
the corporation made or threatened to be made a party to a proceeding, by reason
of the former or present official capacity (as defined) of the person, against
judgments, penalties, fines, settlements and reasonable expenses incurred by the
person in connection with the proceeding if certain statutory standards are met.
"Proceeding" means a threatened, pending or completed civil, criminal,
administrative, arbitration or investigative proceeding, including one by or in
the right of the corporation. Section 302A.521 contains detailed terms regarding
such right of indemnification and reference is made thereto for a complete
statement of such indemnification rights. The Company's Restated Articles of
Incorporation also require the Company to provide indemnification to the fullest
extent of the Minnesota indemnification statute.
The Company maintains directors' and officers' liability insurance,
including a reimbursement policy in favor of the Company.
Pursuant to Section 8.5(b) of the Purchase Agreement, the directors
and officers of the Company are indemnified by the Selling Shareholders against
certain civil liabilities that they may incur under the Securities Act in
connection with this Registration Statement and the related Prospectus.
<PAGE>
ITEM 16. EXHIBITS
2.1 Asset Purchase Agreement dated as of March 20, 1998
between the Company and WEB Technology, Inc. (filed
herewith).
4.1 Specimen Form of the Company's Common Stock Certificate
(incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form SB-2 (File No.
33-64962C)).
4.2 Restated Articles of Incorporation of the Company, as
amended (incorporated by reference to Exhibit 3.1 to the
Company's Registration Statement on Form SB-2
registering the Common Stock (File No. 33-64962C)).
4.3 Bylaws of the Company, as amended (incorporated by
reference to Exhibit 3.2 to the Company's Registration
Statement on Form SB-2 (File No. 33-64962C)).
5.1 Opinion and Consent of Oppenheimer Wolff & Donnelly LLP
(filed herewith).
23.1 Consent of Price Waterhouse LLP (filed herewith).
23.2 Consent of Oppenheimer Wolff & Donnelly LLP (see Exhibit
5.1).
24.1 Power of Attorney (included on page II-4 of this
Registration Statement).
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of securities offered would not
exceed that which was registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commissin pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for the purposes
of determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item 15
above, or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of North St. Paul and State of Minnesota, on April 1,
1998.
AETRIUM INCORPORATED
Date: April 1, 1998 By: /s/ Joseph C. Levesque
-------------------------------------
Joseph C. Levesque
Chief Executive Officer and President
(principal executive officer)
By: /s/ Darnell L. Boehm
-------------------------------------
Darnell L. Boehm
Chief Financial Officer and Secretary
(principal financial and accounting
officer)
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Joseph C. Levesque and Darnell L. Boehm as his or
her true and lawful attorney-in-fact and agent, with full powers of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any or all amendments (including post-effective
amendments) to this Registration Statement and any or all registration
statements relating to the transactions covered hereby that may be filed with
the Securities and Exchange Commission pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or her substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on April 1, 1998
in the capacities indicated.
SIGNATURE TITLE
--------- -----
/s/ Joseph C. Levesque Chairman of the Board
- ---------------------------------
Joseph C. Levesque
/s/ Darnell L. Boehm Director
- ---------------------------------
Darnell L. Boehm
/s/ Terrence W. Glarner Director
- ---------------------------------
Terrence W. Glarner
/s/ Andrew J. Greenshields Director
- ---------------------------------
Andrew J. Greenshields
/s/ Douglas L. Hemer Director
- ---------------------------------
Douglas L. Hemer
/s/ Terrance J. Nagel Director
- ---------------------------------
Terrance J. Nagel
<PAGE>
AETRIUM INCORPORATED
EXHIBIT INDEX TO FORM S-3 REGISTRATION STATEMENT
<TABLE>
<CAPTION>
ITEM NO. DESCRIPTION METHOD OF FILING
- -------- ----------- ----------------
<S> <C> <C>
2.1 Asset Purchase Agreement dated as of March 20, 1998 between the Filed herewith
Company and WEB Technology, Inc. electronically
4.1 Specimen Form of the Company's Common Stock Certificate (1)
4.2 Restated Articles of Incorporation of the Company, as amended (1)
5.1 Opinion and Consent of Oppenheimer Wolff & Donnelly LLP Filed herewith
electronically
23.1 Consent of Price Waterhouse LLP Filed herewith
electronically
23.2 Consent of Oppenheimer Wolff & Donnelly LLP See Exhibit 5.1
24.1 Power of Attorney Included on page
II-4 of this
Registration
Statement
</TABLE>
(1) Incorporated by reference to an exhibit to the Company's
Registration Statement on Form SB-2 (File No. 33-64962C)
-----------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AETRIUM INCORPORATED
AND
WEB TECHNOLOGY , INC.
DATED AS OF MARCH 20, 1998
-----------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
SALE AND PURCHASE OF ASSETS.....................................................................1
1.1 Transfer of Assets............................................................1
1.2 Excluded Assets...............................................................3
1.3 Obtaining Permits and Licenses................................................4
1.4 Assumed Liabilities of Buyer..................................................4
1.5 Liabilities Not Assumed.......................................................4
1.6 Assignments Requiring Consents................................................5
1.7 Purchase Price................................................................6
1.8 Payment of Purchase Price.....................................................6
1.9 Allocation of Purchase Price..................................................7
ARTICLE II
CLOSING.........................................................................................7
2.1 The Closing...................................................................7
2.2 Deliveries of Seller..........................................................8
2.3 Deliveries of Buyer...........................................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER........................................................9
3.1 Corporate Organization........................................................9
3.2 Authorization.................................................................9
3.3 Non-Contravention.............................................................9
3.4 Consents and Approvals.......................................................10
3.5 Financial Statements.........................................................10
3.6 Absence of Certain Changes or Events.........................................10
3.7 Title to Assets..............................................................11
3.8 Real Properties..............................................................11
3.9 Machinery, Equipment, Vehicles and Personal Property.........................12
3.10 Inventories..................................................................12
3.11 Warranty and Product Defect or Return Claims.................................12
3.12 Accounts Receivable..........................................................12
3.13 Bank Accounts; Powers of Attorney............................................13
3.14 Insurance....................................................................13
3.15 Intellectual Property Rights.................................................13
3.16 Commitments..................................................................13
3.17 Taxes........................................................................14
(i)
<PAGE>
3.18 Employee Benefit Plans.......................................................14
3.19 Labor Matters................................................................15
3.20 Permits and Other Operating Rights...........................................16
3.21 Compliance with Laws.........................................................16
3.22 Environment..................................................................16
3.23 Litigation...................................................................17
3.24 Business Generally...........................................................17
3.25 Absence of Certain Business Practices........................................17
3.26 Brokers......................................................................18
3.27 Accuracy of Information......................................................18
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER........................................................18
4.1 Buyer's Organization.........................................................18
4.2 Due Authorization, Execution and Delivery; Effect of Agreement...............18
4.3 Non-Contravention............................................................19
4.4 Consents.....................................................................19
4.5 Litigation...................................................................19
ARTICLE V
COVENANTS OF SELLER............................................................................19
5.1 Cooperation and Assignments..................................................19
5.2 Conduct of Business..........................................................19
5.3 Access.......................................................................20
5.4 Division Audited Financial Statements........................................20
5.5 No Solicitation..............................................................20
5.6 Topping Fee..................................................................20
ARTICLE VI
COVENANTS OF BUYER.............................................................................21
6.1 Cooperation and Assumption...................................................21
ARTICLE VII
ADDITIONAL COVENANTS...........................................................................21
7.1 Books and Records; Personnel.................................................21
7.2 Further Assurances...........................................................22
7.3 Confidentiality Agreement and Noncompetition Covenant of Seller
After Closing................................................................22
7.4 Use of Name..................................................................23
7.5 Maintenance of Health Plan...................................................23
(ii)
<PAGE>
ARTICLE VIII
REGISTRATION OF SHARES.........................................................................23
8.1 Registration.................................................................23
8.2 Procedures for Sale of Registrable Securities................................24
8.3 Restrictions on Sale of Registrable Securities...............................25
8.4 Expenses.....................................................................26
8.5 Indemnification..............................................................26
8.6 Cooperation; Information by Holders..........................................27
8.7 Transfer of Registration Rights..............................................27
8.8 Termination of Registration Rights...........................................28
ARTICLE IX
CONDITIONS TO BUYER'S OBLIGATIONS..............................................................28
9.1 Representations, Warranties and Covenants of Seller..........................28
9.2 No Prohibition...............................................................28
9.3 Further Action...............................................................28
9.4 Shareholder Agreements.......................................................28
9.5 Williams Employment Agreement................................................28
9.6 KRESS Agreement..............................................................29
9.7 WEB Automation Agreement.....................................................29
9.8 Fluids Business Sublease.....................................................29
9.9 Deliveries...................................................................29
ARTICLE X
CONDITIONS TO SELLER'S OBLIGATIONS.............................................................29
10.1 Representations, Warranties and Covenants of Buyer...........................29
10.2 No Prohibition...............................................................29
10.3 Further Action...............................................................29
10.4 Williams Employment Agreement................................................30
10.5 KRESS Agreement..............................................................30
10.6 WEB Automation Agreement.....................................................30
10.7 Fluids Business Sublease.....................................................30
10.8 Deliveries...................................................................30
(iii)
<PAGE>
ARTICLE XI
INDEMNIFICATION AND RELATED MATTERS............................................................30
11.1 Indemnification by Seller....................................................30
11.2 Indemnification by Buyer.....................................................30
11.3 Notice of Indemnification....................................................31
11.4 Indemnification Procedure for Third-Party Claims.............................31
11.5 Survival of Representations, Warranties and Covenants........................31
11.6 Exclusive Remedy.............................................................32
ARTICLE XII
TERMINATION PRIOR TO CLOSING...................................................................32
12.1 Termination..................................................................32
12.2 Effect on Obligations........................................................32
ARTICLE XIII
MISCELLANEOUS..................................................................................32
13.1 Entire Agreement.............................................................32
13.2 Successors and Assigns.......................................................33
13.3 Counterparts.................................................................33
13.4 Headings.....................................................................33
13.5 Modifications and Waivers....................................................33
13.6 Broker's Fees................................................................33
13.7 Expenses.....................................................................33
13.8 Notices......................................................................34
13.9 Arbitration..................................................................35
13.10 Governing Law; Consent to Jurisdiction.......................................35
13.11 Confidentiality and Nonsolicitation..........................................36
13.12 Public Announcements.........................................................37
13.13 Severability.................................................................37
13.14 Definition of Seller's Knowledge.............................................37
13.15 Disclosure Schedule; Buyer's Knowledge; Effect on Seller Representations
and Warranties; Effect of Materiality Qualification..........................37
13.16 No Third Party Beneficiaries.................................................38
13.17 Rule of Construction.........................................................38
</TABLE>
(iv)
<PAGE>
EXHIBITS
A - Closing Balance Sheet Instructions
B - Form of Opinion of Counsel for Seller
C - Form of Opinion of Counsel for Buyer
D - List of Shareholders for First Right of Refusal Agreements
E - Form of Right of First Refusal Agreement
F - Form of Keith E. Williams Employment Agreement
(v)
<PAGE>
DEFINITIONS
Defined Term Page
- ------------ ----
Accounts Receivable.......................................................2
Allocation Schedule.......................................................7
Alternative Transaction..................................................20
Arbitrator Accountants....................................................6
Assets....................................................................1
Assumed Liabilities.......................................................4
Authorit(y)(ies).........................................................10
Automobile Lease..........................................................5
Bank Line.................................................................5
Base Price................................................................6
Board....................................................................23
Business..................................................................1
Business Confidential Information........................................22
Buyer.....................................................................1
Cash Consideration........................................................6
Closing...................................................................7
Closing Balance Sheet.....................................................6
Closing Date..............................................................8
Code.....................................................................14
Commission...............................................................23
Commitment(s)............................................................13
Consent(s)...............................................................10
Disclosure Schedule.......................................................1
Disposal.................................................................16
Disposed Of..............................................................16
Division..................................................................1
Effectiveness Period.....................................................23
Employee Benefit Plans...................................................15
Encumbrances..............................................................1
Environmental Laws.......................................................17
Environmentally Regulated Materials......................................17
Equipment.................................................................2
ERISA....................................................................14
Excluded Assets...........................................................3
Financial Statements.....................................................10
Former Real Property.....................................................16
GAAP......................................................................6
Holder...................................................................24
Indemnitee...............................................................31
(vi)
<PAGE>
Indemnitor...............................................................31
Intellectual Property Rights.............................................13
Interests.................................................................5
Inventory.................................................................2
knowledge................................................................37
Latest Balance Sheet.....................................................10
Law(s)...................................................................10
Liabilities..............................................................10
Litigation...............................................................17
Loss.....................................................................30
Material Adverse Effect...................................................9
Pension Plan.............................................................15
Postage Meter Lease.......................................................5
Purchase Price............................................................6
Real Property.............................................................1
Registrable Securities...................................................23
Registration Statement...................................................23
Release..................................................................16
Released.................................................................16
Representatives..........................................................36
Right of First Refusal Agreement.........................................28
Rule 144.................................................................23
Securities Act...........................................................23
Seller....................................................................1
Seller Confidential Information..........................................36
Share Designees...........................................................7
Shares....................................................................6
Subsidiar(y)(ies).........................................................9
Tax Returns..............................................................14
Taxes....................................................................14
(vii)
<PAGE>
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into this 20th day of March, 1998, is
by and between WEB Technology, Inc., a Delaware corporation ("SELLER"), and
Aetrium Incorporated, a Minnesota corporation ("BUYER").
RECITALS:
FIRST, Seller is engaged through its equipment division (the
"DIVISION") in the business of development, manufacture and distribution of
acceleration test equipment, gross leak detection equipment, preconditioning
equipment, burn-in board loaders and unloaders and test handlers used in the
semiconductor industry and automated handling components used as component parts
of third party equipment supplied to the semiconductor industry (the
"BUSINESS"); and
SECOND, Buyer desires to purchase and Seller desires to sell
substantially all of the assets of the Division;
NOW, THEREFORE, in consideration of the recitals and the mutual
representations, warranties, covenants and agreements contained herein, and upon
the terms and subject to the conditions hereinafter set forth, the parties
hereby agree as follows:
ARTICLE I
SALE AND PURCHASE OF ASSETS
1.1 Transfer of Assets. Subject to the terms and conditions of this
Agreement, and except as otherwise provided in Sections 1.2 and 1.6 hereof, on
the Closing Date (as hereinafter defined), Seller will sell, assign, transfer,
and convey to Buyer, and Buyer will purchase, acquire and accept from Seller,
all of Seller's right, title and interest in and to all of the assets,
properties, rights, contracts and claims employed in connection with the
Business, wherever located, whether tangible or intangible, real, personal or
mixed, as the same exist at the Closing (as hereinafter defined) (collectively,
the "ASSETS"), free and clear of all liens, security interests, or other
encumbrances of any character whatsoever ("ENCUMBRANCES"), except as set forth
in the disclosure schedule delivered by Seller to Buyer in connection herewith
(the "DISCLOSURE SCHEDULE"). The Assets include, without limitation, the assets,
properties, rights, contracts and claims described in the following paragraphs
(a) through (l):
(a) Seller's leasehold interests in the real property leased
by Seller and operated by the Division, as described in Schedule 3.8 of the
Disclosure Schedule (the "REAL PROPERTY");
(b) title to, or Seller's leasehold interests in, all the
furnishings, furniture, office supplies, vehicles, spare parts, tools, machinery
and equipment that are used in the operation of the Business (the "EQUIPMENT");
1
<PAGE>
(c) title to, or Seller's leasehold interests in, all fixed
assets, other than the Equipment, that are used in connection with the Business;
(d) all quantities of inventory, including without limitation
raw materials, work-in-process, finished goods and supplies, used in connection
with the Business (the "INVENTORY");
(e) all accounts receivable and all notes receivable (whether
short-term or long-term) from third parties arising out of the operation of the
Business, together with any unpaid interest accrued thereon and any security or
collateral therefor, including without limitation recoverable deposits (the
"ACCOUNTS RECEIVABLE");
(f) all rights of Seller under or pursuant to all warranties,
representations and guarantees made by suppliers, manufacturers and contractors
in connection with products or services of the Business, or affecting the
Assets;
(g) all rights and interests of Seller in and to patents and
patent applications owned by Seller or licensed to Seller by third parties and
used in connection with the Business, including without limitation those that
are listed in the Disclosure Schedule, and all rights and interests of Seller in
and to research, development and commercially practiced processes, trade
secrets, know-how, inventions and manufacturing, engineering and other technical
information, whether owned by Seller or licensed from third parties by Seller,
which are used in connection with the Business;
(h) all rights and interests of Seller in and to all
trademarks, trade names and service marks (other than Seller's name), and
registrations and applications for such trademarks, trade names and service
marks, used in connection with the Business, including without limitation those
that are listed in the Disclosure Schedule, and all rights and interests of
Seller in and to copyrights, and registrations and applications for such
copyrights, used in connection with the Business, including without limitation
those that are listed in the Disclosure Schedule;
(i) all contracts, agreements, arrangements and/or commitments
of any kind which relate to the Business or the Assets, including without
limitation those contracts listed in the Disclosure Schedule, exclusive,
however, of those contracts Buyer elects not to assume pursuant to Section 1.6
hereof;
(j) all customer and vendor lists relating to the Business,
and all files and documents (including credit information) relating to such
customers and vendors, and other business and financial records, files, books
and documents relating to the Assets and/or the Business, including without
limitation computer programs (including computer modeling programs), manuals and
data, sales and advertising materials, sales, distribution and purchase
correspondence and trade association memberships relating to the Assets and/or
the Business; and
2
<PAGE>
(k) all prepaid charges, prepaid rent, sums and fees and all
rights to lease deposits, travel advances to employees, and refunds pertaining
to the Business.
1.2 Excluded Assets. Notwithstanding any other terms contained herein,
Seller is not hereunder selling, assigning, transferring or conveying to Buyer
the following assets, rights and properties (the "EXCLUDED ASSETS"):
(a) any cash, depository accounts, certificates of deposit or
securities;
(b) any rights or interest in or to Seller's name, except as
provided under Section 7.4 hereof;
(c) any policies of insurance relating to the Business or the
Assets or any rights thereunder;
(d) any refunds for income or franchise Taxes (as hereinafter
defined);
(e) any receivables from employees for 401(k) plan advances;
(f) any receivables due on stock option exercises;
(g) any intercompany receivables from or investments in
Subsidiaries (as hereinafter defined), exclusive of trade credits (e.g., for
returns, rework or warranty claims);
(h) any assets exclusively used in or arising from Seller's
fluids distribution business;
(i) 1998 Cadillac Seville under the Automobile Lease (as
hereinafter defined);
(j) postage meter under the Postage Meter Lease (as
hereinafter defined);
(k) except as otherwise set forth in the last sentence of
Section 1.6 hereof, any right, title and interest under all leases, contracts,
agreements, licenses, permits, exemptions, franchises, variances, waivers,
consents, approvals and other authorizations which are not transferable without
consent (unless such consent has been obtained); and
(l) minute books, stock record books and corporate
certificates of authority.
1.3 Obtaining Permits and Licenses. Seller will assign, transfer or
convey to Buyer at the Closing those governmental permits and licenses described
in the Disclosure Schedule which are held or used by Seller in connection with
the Business and with respect to which any necessary third party consents to
assignment have been obtained or which can be assigned without having to obtain
the consent of any third party. Subsequent to the Closing, to the extent
permitted by law, Seller will have the right to cancel any permits or licenses
and any bonds, guarantees or undertakings by Seller now applicable to the Assets
or the Business to the extent such is not so assigned or transferred to
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Buyer pursuant to this Section 1.3 and is not subject to Seller's continuing
obligations under Section 1.6 hereof.
1.4 Assumed Liabilities of Buyer. Subject to Section 1.6 hereof, Buyer
will assume and pay, perform and discharge as and when due the following
liabilities and obligations, whether known, unknown, contingent, absolute,
determined, indeterminable or otherwise on the Closing Date and whether incurred
or accruing prior to, on or after the Closing Date, to the extent relating to or
arising from the Business ("ASSUMED LIABILITIES"):
(a) all liabilities and obligations of Seller not performed or
satisfied as of the Closing Date under all of the Commitments (as hereinafter
defined) listed on Schedule 3.16 of the Disclosure Schedule;
(b) all liabilities of Seller disclosed in the Disclosure
Schedule;
(c) all liabilities of Seller under that certain Promissory
Note of Seller dated December 3, 1997 to the order of Inwood National Bank in
the principal amount of Thirty-Nine Thousand Nine Hundred Twenty-Three and
70/100 Dollars ($39,923.70) secured by Seller's telephone system, including
accrued interest thereon; and
(d) all other liabilities of Seller reflected or reserved
against in the Latest Balance Sheet (as hereinafter defined) or incurred since
December 31, 1997 in the ordinary course of business and consistent with past
practice.
1.5 Liabilities Not Assumed. Except as specifically set forth in
Section 1.4 hereof, Buyer will not assume and will not be liable for any
liabilities or obligations of Seller, whether known, unknown, contingent,
absolute, determined, indeterminable or otherwise on the Closing Date, whether
incurred or accruing prior to, on or after the Closing Date, and whether or not
relating to or arising from the Business. Specifically but without limiting the
scope of or being limited by the preceding sentence, Buyer will not assume and
will not be liable for any of the following liabilities or obligations of
Seller:
(a) any liability or obligation for or with respect to income
or franchise Taxes, including without limitation income or franchise Taxes
incurred on the sale of Assets contemplated hereby;
(b) any liability or obligation incurred by Seller in
connection with the negotiation and consummation of this Agreement as set forth
in Section 13.7(a) hereof;
(c) any liability or obligation under Seller's bank line of
credit evidenced by that certain Promissory Note dated June 14, 1997 to the
order of Inwood National Bank in the stated principal amount of Seven Hundred
Fifty-Thousand Dollars ($750,000) (the "BANK LINE"), including without
limitation accrued interest thereon;
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(d) any liability or obligation under that certain automobile
lease with Sewell Village Cadillac Company Inc. dated January 12, 1998 for a
1998 Cadillac Seville (the "AUTOMOBILE LEASE");
(e) any liability or obligation under that certain postage
meter lease with Neopost dated September 23, 1996 (the "POSTAGE METER LEASE");
(f) any liability or obligation of Seller with respect to the
claim by PSA Inc. for commissions as stated in its letter to Seller dated March
9, 1998;
(g) any liability or obligation of Seller under any sales
representative agreement or sales distribution agreement scheduled as a
Commitment, except commissions or discounts accrued thereunder as of Closing or
with respect to purchase orders assumed hereunder or with respect to
post-termination commissions or discounts that may accrue under the terms
thereof on the basis that such agreements terminate effective March 31, 1998;
(h) any liability or obligation for profit sharing;
(i) sponsorship of Seller's 401(k) plan or any liability or
obligation in connection therewith.
1.6 Assignments Requiring Consents. Seller will use reasonable efforts,
and Buyer will cooperate with Seller, to obtain all non-governmental approvals,
consents or waivers necessary to assign to Buyer all leases, contracts,
licenses, agreements, sales or purchase orders, commitments, property interests,
qualifications or other assets described in Section 1.1 hereof or any claim,
right or benefit arising thereunder or resulting therefrom (the "INTERESTS") as
soon as practicable; provided, however, that neither Seller nor Buyer will be
obligated to pay any consideration therefor (except for filing fees and other
ordinary administrative charges which will be paid by Buyer) to the third party
from whom such approval, consent or waiver is requested.
To the extent any of the approvals, consents or waivers referred to
above have not been obtained by Seller as of the Closing, Buyer may elect by
written notice to Seller to exclude the applicable Interests and liabilities in
connection therewith from the Assets and the Assumed Liabilities. In the event
Buyer does not make such election, and without limiting the rights of Buyer
under this Agreement, Seller will (a) take all reasonable steps necessary to
obtain the consent of any such third party, (b) cooperate with Buyer in any
reasonable and lawful arrangements designed to provide the benefits of such
Interests to Buyer so long as Buyer fully cooperates with Seller in such
arrangements and promptly reimburses Seller for all payments, charges or other
liabilities made or suffered by Seller in connection therewith (provided that
nothing herein will require Buyer to make any payment or reimbursement of any
consideration for third party consent not agreed to by Buyer), and (c) enforce,
at the request of Buyer and at the expense and for the account of Buyer, any
rights of Seller arising from such Interests against such issuer thereof or the
other party or parties thereto (including the right to elect to terminate any
such Interests in accordance with the terms thereof upon the written advice of
Buyer). To the extent that Seller enters into lawful arrangements designed to
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provide the benefits of any Interests as set forth in clause (b) above, such
Interests will be deemed to have been assigned to Buyer for purposes of Section
1.1 hereof.
1.7 Purchase Price. The aggregate consideration to be paid by Buyer to
Seller for the Assets (the "PURCHASE PRICE") will be Seven Million Eight Hundred
Thirty-Five Thousand Dollars ($7,835,000) (the "CASH CONSIDERATION") and nine
hundred thousand (900,000) shares of the common stock of Aetrium Incorporated
(the "SHARES"), subject to reduction pursuant to the remainder of this Section
1.7:
(a) The Cash Consideration will be reduced on a
dollar-for-dollar basis by the amount, if any, by which Seller's Net Current
Assets (as hereinafter defined) on Closing is less than the sum of Three Million
Three Hundred Thirty-Five Thousand Dollars ($3,335,000).
(b) Promptly after Closing, Buyer and Seller will cooperate to
prepare a schedule of Seller's Net Current Assets as of Closing in accordance
with United States generally accepted accounting principles ("GAAP") on a basis
consistent with the Latest Balance Sheet (as hereinafter defined), provided that
such schedule will be prepared in accordance with the instructions listed on
Exhibit A hereto regardless of whether such instructions conform to GAAP or are
consistent with the Latest Balance Sheet. In the event the parties cannot agree
on Seller's Net Current Assets as of Closing, any unresolved issues will be
submitted to Ernst & Young, Dallas, Texas office (the "ARBITRATOR ACCOUNTANTS"),
whose decision on any such issues will be final and binding on the parties. "NET
CURRENT ASSETS" means aggregate Accounts Receivable and Inventory less aggregate
trade payables included in Assumed Liabilities. Seller's Net Current Assets as
of Closing as so determined will be binding upon the parties. Buyer and Seller
will use their best efforts to cause Net Current Assets to be determined within
thirty (30) days after Closing. Buyer and Seller will each bear the costs of
their respective accountants and will share equally any fees of the Accountant
Arbitrator incurred in the determination of Seller's Net Current Assets as of
Closing as hereinabove provided.
1.8 Payment of Purchase Price. The Purchase Price will be payable as
follows:
(a) Seven Million Three Hundred Thirty-Five Thousand Dollars
($7,335,000) of the Cash Consideration will be paid at Closing to Seller by wire
transfer of immediately available funds to accounts designated by Seller prior
to Closing.
(b) The remainder of the Cash Consideration will be paid to
Seller, together with interest thereon from the Closing Date to the date paid at
the annual rate of six percent (6%) (subject to increase to the late payment
rate provided below if applicable), by wire transfer of immediately available
funds to accounts designated by Seller prior to Closing promptly upon the
earlier of final determination of Seller's Net Current Assets as of Closing or
ninety (90) days after Closing. In the event any adjustment under Section 1.7(a)
reduces the Cash Consideration below the amount then received by Seller
therefor, immediately upon determination of such adjustment Seller will promptly
reimburse Buyer the amount of any such deficit, together with interest thereon
from the Closing Date to the date paid at the annual rate of six percent (6%)
(subject to increase to the late payment rate provided below if applicable), in
immediately available funds to accounts designated by Buyer. In
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the event of any delay in any payment due under this Section 1.8(b), such amount
will bear interest from three (3) business days after the due date until paid in
full at the annual rate of twelve percent (12%).
(c) The Shares will be issued at Closing under such individual
certificates in such amounts and in the names of such holders (the "SHARE
DESIGNEES") as Seller designates prior to Closing.
1.9 Allocation of Purchase Price.
(a) Buyer will prepare (or cause to be prepared) an allocation
(the "ALLOCATION SCHEDULE") of the Purchase Price (plus Assumed Liabilities and
Buyer's expenses of the transaction) among the Assets. Such allocation will be
made in accordance with Code (as hereinafter defined) Section 1060 and any
applicable rules or regulations thereunder.
(b) Seller and Buyer (1) will be bound by the allocation
contained in the Allocation Schedule for purposes of determining any and all
consequences with respect to Taxes of the transactions contemplated herein, (2)
will prepare and file all Tax Returns (as hereinafter defined) in a manner
consistent with such Allocation Schedule (including Form 8594, "Asset
Acquisition Statement"), and (3) will take no position inconsistent with such
Allocation Schedule in any Tax Return, any discussion with or proceeding before
any tax Authority (as hereinafter defined), or otherwise. In the event that such
Allocation Schedule is disputed by any tax Authority, the party receiving notice
of such dispute will promptly notify the other party thereof.
ARTICLE II
CLOSING
2.1 The Closing. The closing of the transactions contemplated hereby
(the "CLOSING") will take place at the offices of Oppenheimer Wolff & Donnelly
in Minneapolis, Minnesota, at 10:00 a.m. on April 1, 1998 or, if later, two (2)
business days following the satisfaction or waiver of all of the conditions to
the parties' obligations set forth in Articles IX and X, unless the parties
otherwise mutually agree (the "CLOSING DATE"). All matters at the Closing will
be considered to take place simultaneously effective immediately upon the
opening of business on the Closing Date and no de livery of any document will be
deemed complete until all transactions and deliveries of documents are
completed.
2.2 Deliveries of Seller. At the Closing, Seller will deliver the
following documents to Buyer:
(a) such bills of sale, endorsements, assignments (together
with any necessary consents), deeds and other good and sufficient instruments of
conveyance and transfer, in form and substance reasonably satisfactory to Buyer
and its counsel, to vest in Buyer valid legal title to the Assets;
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(b) resolutions of the board of directors and shareholders of
Seller authorizing the execution, delivery and performance of this Agreement and
consummation of the transactions contemplated hereby by Seller certified by the
Secretary of Seller to be complete, correct and as in effect as of the Closing
Date;
(c) the certificate required of Seller pursuant to Section 9.1
hereof;
(d) an opinion of counsel for Seller, substantially in the
form of Exhibit B attached hereto; and
(e) any other documents reasonably requested by Buyer, to
confirm the accuracy of the representations and warranties and the performance
of the agreements of Seller hereunder.
2.3 Deliveries of Buyer. At the Closing, Buyer will deliver to Seller
the following:
(a) the Cash Consideration to be paid at Closing together with
the Note and Shares in accordance with Section 1.8 hereof;
(b) such instruments of assumption, in form and substance
reasonably satisfactory to Seller and its counsel, to constitute an assumption
by Buyer of all Assumed Liabilities;
(c) resolutions of the board of directors of Buyer authorizing
the execution, delivery and performance of this Agreement and the Note and
consummation of the transactions contemplated hereby by Buyer, certified by the
Secretary of Buyer to be complete, correct and as in effect as of the Closing
Date;
(d) the certificate required of Buyer pursuant to in Section
10.1 hereof;
(e) the opinion of counsel for Buyer, in the form of Exhibit C
attached hereto; and
(f) any other documents reasonably requested by Seller, to
confirm the accuracy of the representations and warranties and the performance
of the agreements of Buyer hereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer that:
3.1 Corporate Organization. Seller is a corporation duly organized,
validly existing and in good standing under the Laws (as hereinafter defined) of
the state of Delaware, has full corporate power and authority to carry on its
business as it is now being conducted and to own, lease and operate its
properties and assets, and is duly qualified or licensed to do business as a
foreign corporation in good standing in every other jurisdiction in which the
character or location of the properties and assets owned, leased or operated by
it or the conduct of its business requires such
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qualification or licensing, except in such jurisdictions in which the failure to
be so qualified or licensed and in good standing would not, individually or in
the aggregate, have a material adverse effect on the condition (financial or
otherwise), working capital, assets, properties, liabilities, obligations,
reserves, businesses, prospects, customers, customer relations, goodwill or
going concern value ("MATERIAL ADVERSE EFFECT") with respect to Seller. Schedule
3.1 of the Disclosure Schedule contains a list of all jurisdictions in which
Seller is qualified or licensed to do business. The charter, bylaws, minute
books, stock transfer books and other corporate records of Seller, all of which
have been made available to Buyer, are complete and correct in all material
respects, have been maintained in accordance with reasonable business practices,
and contain accurate and complete records of all formal meetings held of, and
corporate actions taken by, the shareholders, board of directors and committees
of the board of directors of Seller. Schedule 3.1 of the Disclosure Schedule
sets forth the name and Seller's percentage ownership of each legal entity as to
which more than forty percent (40%) of the outstanding equity securities having
ordinary voting rights or power at the time of determination is being made is
owned or controlled, directly or indirectly, by Seller (individually and
collectively, the "SUBSIDIAR(Y)(IES)").
3.2 Authorization. Seller has all requisite corporate power and
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Seller of this Agreement and the consummation by Seller of the transactions
contemplated hereby have been duly authorized by all necessary corporate action.
This Agreement has been duly and validly executed by Seller and constitutes the
valid and binding legal obligation of Seller, enforceable against Seller in
accordance with its terms, except to the extent that such enforceability (a) may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to creditors' rights generally, and (b) is subject to
general principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.3 Non-Contravention. Except as set forth in Schedule 3.3 of the
Disclosure Schedule, neither the execution, delivery and performance of this
Agreement nor the consummation of the transactions contemplated hereby will (a)
violate or be in conflict with any provision of the articles or certificates of
incorporation or bylaws of Seller, or (b) be in conflict with, or constitute a
default, however defined (or an event which, with the giving of due notice or
lapse of time, or both, would constitute such a default), under, or cause or
permit the acceleration of the maturity of, or give rise to any right of
termination, cancellation or imposition of fees or penalties under, any debt,
instrument, agreement, permit or other obligation, commitment or authorization
to which Seller is a party or by which Seller or any of Seller's properties or
assets is or may be bound, or (c) result in the creation or imposition of any
Encumbrance upon any property or assets of Seller, or (d) violate any treaty,
law, rule, regulation, order, judgment or decree (individually and collectively,
"LAW(S)") of any foreign, federal, state or local governmental or
quasi-governmental administrative, regulatory or judicial court, department,
commission, agency, board, bureau, instrumentality or other authority
(individually and collectively, "AUTHORIT(Y)(IES)") to which Seller is subject.
3.4 Consents and Approvals. Except as set forth in Schedule 3.4 of the
Disclosure Schedule, with respect to Seller, no consent, approval, order or
authorization of or from, or registration, notification, declaration or filing
with, any Authority or any individual or other private entity (individually and
collectively, "CONSENT(S)") is required in connection with the execution,
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delivery or performance of this Agreement by Seller or the consummation by
Seller of the transactions contemplated hereby.
3.5 Financial Statements. Seller has furnished to Buyer the unaudited
balance sheets of the Division as of December 31, 1996 and 1997 (the December
31, 1997 balance sheet is herein referred to as the "LATEST BALANCE SHEET") and
related statements of operations and retained earnings and cash flows of the
Division for the years then ended respectively (together, the "FINANCIAL
STATEMENTS"). Except as set forth in Schedule 3.5 of the Disclosure Schedule,
the Financial Statements are in accordance with the books and records of Seller,
have been prepared in conformity with GAAP consistently applied throughout the
periods (except as stated therein or in the notes thereto), and are true,
complete and accurate in all material respects and fairly present the financial
position of Seller as of the respective dates thereof, and the operations and
retained earnings and cash flows for the periods then ended. Except as set forth
in Schedule 3.5 of the Disclosure Schedule, Seller has no liabilities or other
obligations related to the Division (whether fixed, absolute or contingent,
accrued or unaccrued, matured or unmatured, known or unknown, direct or
indirect, joint or several, or otherwise) ("LIABILITIES") except (a) Liabilities
which are reflected or reserved against in the Latest Balance Sheet, which
reserves reflected therein are appropriate and reasonable, and (b) Liabilities
incurred in the ordinary course of business and consistent with past practice
since the date of the Latest Balance Sheet and not resulting from, arising out
of, relating to, in the nature of or caused by any breach of contract, tort,
infringement of third party rights, violation of Law or application of doctrines
of strict liability.
3.6 Absence of Certain Changes or Events. Except as set forth in
Schedule 3.6 of the Disclosure Schedule, since the date of the Latest Balance
Sheet, Seller has not (a) suffered any damage, destruction or casualty loss
resulting in any Material Adverse Effect with respect to the Division, the
Business or the Assets or experienced any event or failed to take any action
which reasonably could be expected to result in a Material Adverse Effect with
respect to the Division, the Business or the Assets, (b) discharged or incurred
any material obligation or liability with respect to the Business, except under
the Bank Line or in the ordinary course of business, (c) entered into any
transaction with respect to the Business not in the ordinary course of its
business, except as permitted in or contemplated by other Sections of this
Agreement, (d) suffered any loss of key employees, sales representatives,
distributors, customers or suppliers or other favorable business relationships
with respect to the Division, the Business or the Assets, (e) declared, set
aside or paid any dividend or other distribution (whether in cash, stock,
property or any combination thereof) in respect of its capital stock, or
redeemed or acquired any of its capital stock, (f)(1) increased the rate or
terms of compensation payable or to become payable to any director, officer or
employee of the Division or modified or entered into any Employee Benefit Plan
(as hereinafter defined) to increase any bonus, insurance, pension or other
employee benefit for any such directors, officers or employees, except increases
in compensation or benefits and new hires of employees occurring in the ordinary
course of business in accordance with its customary practices (which includes
normal periodic performance reviews and related compensation and benefit
increases) or (2) paid, lent or advanced any amount to, or sold, transferred or
leased any properties or assets (real, personal or mixed, tangible or
intangible) to, or entered into any agreement or arrangement with any such
directors, officers or employees, other than the regular payment of salaries and
travel advances in the ordinary course of business and consistent with past
practice, (g) sold, otherwise disposed of or
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encumbered any asset of the Division, except sales and other dispositions in the
ordinary course of business consistent with past practice of inventory or of
other tangible property that has been replaced with property of at least
equivalent usefulness to the operation of the Business or that was not material
to the operation of the Business, (h) entered into any commitment for capital
expenditures for additions to plant, property or equipment with respect to the
Division, or (i) incurred or guaranteed any indebtedness for borrowed money
except under the Bank Line.
3.7 Title to Assets. Seller has good title or a valid lease or license
with respect to all Assets (including without limitation all assets reflected on
the Latest Balance Sheet, except for such assets sold, consumed or otherwise
disposed of in the ordinary course of business since the date of the Latest
Balance Sheet), free and clear of all Encumbrances, except (a) as set forth in
Schedule 3.7 of the Disclosure Schedule, and (b) mechanics', carriers', workers'
or other like liens arising in the ordinary course of the Business with respect
to obligations not yet due and payable, liens for current Taxes not yet due and
payable, and other Encumbrances which, individually or in the aggregate, do not
have a Material Adverse Effect with respect to the Division, the Business or the
Assets.
3.8 Real Properties.
(a) The Real Property is the only real property utilized by
the Division. Schedule 3.8 of the Disclosure Schedule sets forth the lease
agreements on the Real Property to which Seller is a party or is bound.
(b) Except as set forth in Schedule 3.8 of the Disclosure
Schedule, to Seller's knowledge the Real Property is free from structural
defects, in good operating condition and repair, with no material maintenance,
repair or replacement having been deferred or neglected, suitable for the
intended use and free from other material defects.
(c) Except as set forth in Schedule 3.8 of the Disclosure
Schedule, (1) all certificates of occupancy, permits and licenses of all
Authorities having jurisdiction over the Real Property required to have been
issued to Seller, as applicable, to enable the Real Property to be lawfully
occupied and used for all of the principal purposes for which it is currently
occupied and used have been lawfully issued and are, as of the date hereof, in
effect, (2) the Real Property and its present use conform in all respects to all
occupational, safety, health, zoning, planning, subdivision, platting and
similar Laws, (3) all public utilities necessary for the use and operation of
the Real Property and the facilities located thereon are available for use or
access at the Real Property, and (4) there is no legal or physical impairment to
free ingress to or egress from the Real Property.
(d) Except as set forth in Schedule 3.8 of the Disclosure
Schedule, Seller has not received any written notice of any pending, threatened
or contemplated condemnation proceeding affecting the Real Property or any part
thereof, or of any sale or other disposition of the Real Property or any part
thereof in lieu of condemnation.
3.9 Machinery, Equipment, Vehicles and Personal Property. Except as set
forth in Schedule 3.9 of the Disclosure Schedule, all items of Equipment which
are necessary to the conduct of the Business are in good operating condition and
repair and fit for the intended purposes thereof
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and no material maintenance, replacement or repair has been deferred or
neglected. Schedule 3.9 of the Disclosure Schedule sets forth a list of all
Equipment leased by or to Seller and each lease thereof.
3.10 Inventories. Except as set forth in Schedule 3.10 of the
Disclosure Schedule, all Inventory consists of a quality and quantity usable and
salable in the ordinary course of business consistent with past practice, and
the present quantities of all Inventory are reasonable in the present
circumstances of the Business as currently conducted.
3.11 Warranty and Product Defect or Return Claims. Schedule 3.11 of the
Disclosure Schedule sets forth a list of all pending warranty and other product
defect or return claims against Seller with respect to the Business which
individually exceed Five Thousand Dollars ($5,000) in cost of remedy. All
pending warranty and other product defect or return claims against Seller do not
exceed in the aggregate Fifty Thousand Dollars ($50,000) in cost of remedy.
3.12 Accounts Receivable. Except as set forth in Schedule 3.12 of the
Disclosure Schedule, all Accounts Receivable have arisen only from bona fide
transactions in the ordinary and regular course of business and are collectible
in the aggregate amounts thereof through the continuation of existing collection
procedures, after allowance for credits in the ordinary course of business and
subject to bad debt reserves established by Seller consistent with past
practice, and there are no known claims, refusals to pay or other rights of
set-off against any thereof.
3.13 Bank Accounts; Powers of Attorney. Schedule 3.13 of the Disclosure
Schedule sets forth (a) the names of all financial institutions, investment
banking and brokerage houses, and other similar institutions at which Seller
maintains accounts, deposits, safe deposit boxes of any nature, the names of all
persons authorized to draw thereon or make withdrawals therefrom, and any
limitations or restrictions as to use, withdrawal or otherwise, and (b) the
names of all persons or entities holding general or special powers of attorney
from Seller and a summary of the terms thereof.
3.14 Insurance. Schedule 3.14 of the Disclosure Schedule contains an
accurate and complete list of all policies of fire and other casualty, general
liability, theft, life, workers' compensation, health, directors and officers,
business interruption and other forms of insurance owned or held by Seller,
specifying the insurer, the policy number, the term of the coverage and, in the
case of any "occurrence" coverage, the same information as to predecessor
policies for the previous five (5) years. All present policies are in full force
and effect and all premiums with respect thereto have been paid. Seller has not
been denied any form of insurance and no policy of insurance has been revoked or
rescinded during the past five (5) years, except as described on Schedule 3.14
of the Disclosure Schedule. Schedule 3.14 also describes all third party
administered self-insurance arrangements that Seller has.
3.15 Intellectual Property Rights. Except as disclosed in Schedule 3.15
of the Disclosure Schedule, (a) Seller owns or possesses adequate licenses or
other valid rights to use all patents, patent rights, trademarks, service marks,
trade names, copyrights, applications for any thereof, trade secrets, know-how
and other intellectual property ("INTELLECTUAL PROPERTY RIGHTS") used in or
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necessary for the conduct of the Business, (b) the conduct of the Business does
not conflict with or infringe on any valid Intellectual Property Rights of
others in any way which might result in a Material Adverse Effect with respect
to the Division, the Business or the Assets, and (c) to Seller's knowledge no
third party has come into conflict with or infringed on any Intellectual
Property Rights of Seller. Schedule 3.15 of the Disclosure Schedule sets forth a
list of all material United States and foreign patents, trademarks, service
marks, trade names and registered copyrights, and applications for any thereof,
used by Seller in the conduct of the Business and all licenses to or by Seller
of Intellectual Property Rights which Seller owns or uses in the conduct of the
Business.
3.16 Commitments. Schedule 3.16 of the Disclosure Schedule contains a
list of or cross references to other applicable Schedules of the Disclosure
Schedule with respect to all contracts, agreements and other commitments to
which Seller is a party or by which Seller or any of its properties is bound and
which are individually material to the Business (individually and collectively,
the "COMMITMENT(S)"). Except as disclosed in Schedule 3.16 of the Disclosure
Schedule, (a) all Commitments are valid and in full force and effect and
enforceable against Seller and any other party thereto in accordance with their
terms (subject to bankruptcy, insolvency, creditors' rights, equitable
considerations and public policy, and except that no representation or warranty
is given concerning the availability of specific performance or other equitable
remedies), and (b) neither Seller nor any other party thereto is in material
default thereunder, nor are there circumstances which with the giving of notice
or passing of time or both would constitute a material default thereunder by
Seller or any other party thereto, nor has Seller received any notice claiming
any such default or circumstance.
3.17 Taxes.
(a) Except as set forth in Schedule 3.17 of the Disclosure
Schedule, (1) Seller and/or its shareholders have duly and timely filed (and
until the Closing Date will duly and timely file or obtain valid extensions to
file) all tax and information reports, returns, declarations, statements and
related documents required to be filed with any Authority ("TAX RETURNS") by it
with respect to net or gross income, profits, windfall profits, franchise, gross
receipts, premium, sales, use, ad valorem, service, service use, license, lease,
occupation, employment, withholding, excise, transfer, real and personal
property, customs, duties and other taxes, charges and levies and all interest,
penalties, assessments and deficiencies with respect thereto ("TAXES") and have
duly paid, or made adequate provision for the due and timely payment of, all
such Taxes due or claimed to be due from or with respect to Seller by any
Authority, (2) all Tax Returns were (or will be) true, correct and complete in
all material respects when filed for all periods ending on or before the Closing
Date, (3) no deficiencies for any Taxes for which Seller may be liable have been
asserted in writing or assessed against Seller or any former subsidiary of
Seller for which Seller may be liable which remain unpaid nor has Seller
received notification of any pending or proposed examination by any taxing
Authority, (4) there are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any such Tax Returns for any
period, and (5) for purposes of computing Taxes and the filing of Tax Returns,
Seller has not failed to treat as "employees" any individual providing services
to Seller who would be classified as an "employee" under the applicable rules or
regulations of any Authority with respect to such classification.
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(b) Seller is not a foreign person within the meaning of
Section 1445(b)(2) of the Internal Revenue Code of 1986, as amended (the
"CODE").
(c) Seller has had in effect a valid election under Code
Section 1362 to be treated as an "S corporation" for each of its taxable years
ended after February 28, 1989. Seller has not taken any action to revoke such
election. Seller is not aware of any basis or the existence of any facts that
would permit the Internal Revenue Service to revoke such election for any period
prior to the Closing Date. Except as described on Schedule 3.17 of the
Disclosure Schedule, since the effective date of its election as an S
corporation to and including the Closing Date, Seller will not have incurred or
become liable for the payment of any corporate-level income tax, or any related
penalties or interest.
3.18 Employee Benefit Plans. Schedule 3.18 of the Disclosure Schedule
sets forth a true and complete list of each "employee benefit plan" (as that
term is defined under Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) and any other plan, practice, policy,
procedure, program, arrangement or agreement that is maintained by Seller
related to the employment of any present or former director, officer or employee
of the Division under which Seller has any present or future obligation or
liability (the "EMPLOYEE BENEFIT PLANS"). With respect to each such Employee
Benefit Plan, Seller has delivered or made available to Buyer copies of and has
scheduled on Schedule 3.18 of the Disclosure Schedule all (a) plans and related
trust documents and amendments thereto, (b) the most recent summary plan
description and the three (3) most recent annual reports on Treasury Form 5500,
including all schedules and attachments thereto, with respect to any Employee
Benefit Plan for which such report is required, (c) the three (3) most recently
issued actuarial valuations, and (d) the most recent determination letter
received from the Internal Revenue Service and the full and complete application
therefor submitted to the Internal Revenue Service. No event has occurred for
which, and there exists no condition or set of circumstances under which, Seller
or any Employee Benefit Plan that is an "employee pension benefit plan" (as
defined in ERISA Section 3(3)) ("PENSION PLAN") could be subject to any
liability under ERISA Section 502(i) or Code Section 4975. No Pension Plan is
subject to Title IV of ERISA or to Code Section 412. With respect to each
Employee Benefit Plan, except as set forth in Schedule 3.18 of the Disclosure
Schedule, (1) Seller is in compliance with the requirements prescribed by all
applicable Laws, including without limitation ERISA and the Code, (2) each
Pension Plan intended to qualify under Code Section 401(a) has received a
favorable determination letter from the Internal Revenue Service with respect to
such qualification, its related trust has been determined to be exempt from
taxation under Code Section 501(a), and nothing has occurred since the date of
such letter that would adversely affect such qualification or exemption, and (3)
there are no actions or proceedings (other than routine claims for benefits)
pending with respect to any Employee Benefit Plan or against the assets of any
Employee Benefit Plan. No Pension Plan is a "multiemployer plan," within the
meaning of ERISA Section 3(37), and neither Seller nor any former subsidiary of
Seller has participated in or contributed to a multiemployer plan. With respect
to each Employee Benefit Plan that is a "group health plan" within the meaning
of ERISA Section 601(a) and that is subject to Code Section 4980B, including but
not limited to any medical plan, dental plan, health care reimbursement plan or
employee assistance program, Seller has operated such plans in material
compliance with the continuation coverage requirements of those provisions and
Part 6 of Title I of ERISA and any applicable comparable state Laws, and no
Employee Benefit Plan provides for
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medical, health, life or other welfare benefits for present or future terminated
employees or their spouses or dependents in excess of those required to be
provided under such Laws. The transactions contemplated herein will not result
in the acceleration, accrual, vesting, funding or payment of any contribution or
benefit under any Employee Benefit Plan. No action or omission of Seller or any
director, officer, employee, or agent thereof in any way restricts, impairs or
prohibits Seller or any successor thereof from amending, merging, or terminating
any Employee Benefit Plan in accordance with the express terms thereof and
applicable Laws. Neither Seller nor any former subsidiary of Seller has taken
any action which has or could result in any liability to Seller under the Worker
Adjustment and Retraining Notification Act.
3.19 Labor Matters. Except as set forth in Schedule 3.19 of the
Disclosure Schedule, (a) Seller is not obligated by or subject to any collective
bargaining agreement or collective bargaining obligation with respect to the
Division, (b) there are no strikes, slowdowns or picketing against Seller with
respect to the Division previously experienced or pending, or to Seller's
knowledge threatened, nor are there nor have there been any efforts, to Seller's
knowledge, to organize any unions or employee associations at the Business, and
(c) there are no pending, or to Seller's knowledge threatened, grievances or
unfair labor charges with respect to the Division.
3.20 Permits and Other Operating Rights. Except as set forth in
Schedule 3.20 of the Disclosure Schedule, Seller does not require the Consent of
any Authority to permit it to operate the Business in the manner in which it
presently is being operated, and possesses and is in compliance with the
requirements of all permits, licenses and other authorizations from all
Authorities presently required necessary to permit it to operate the Business in
the manner in which it presently is conducted. Each of such permits, licenses
and other authorizations is scheduled on Schedule 3.20 of the Disclosure
Schedule, and no action is pending to revoke, terminate, modify or restrict any
thereof.
3.21 Compliance with Laws. Except as set forth in Schedule 3.21 of the
Disclosure Schedule, Seller has operated and is operating the Business in
compliance with all Laws applicable to the Business the failure to comply with
which could have, either individually or in the aggregate, a Material Adverse
Effect with respect to the Division, the Business or the Assets.
3.22 Environment.
(a) Schedule 3.22 of the Disclosure Schedule lists all
environmental studies made by or furnished to Seller relating to the Real
Property or any other property formerly owned, leased or operated by Seller or
any Subsidiary or former subsidiary (individually and collectively, "FORMER REAL
PROPERTY"), each of which studies has been delivered or made available to Buyer.
(b) Except as set forth in Schedule 3.22 of the Disclosure
Schedule, neither Seller nor any Subsidiary or former subsidiary nor any prior
or current other owner or lessee has generated, handled, manufactured, treated,
stored, used, transported, or discharged, leaked, pumped, injected, spilled,
emitted, dispersed, leached, migrated or otherwise released ("RELEASED" and any
thereof being a "RELEASE"), or deposited, placed, buried, dumped or otherwise
disposed of ("DISPOSED OF" and any thereof being a "DISPOSAL"), any
Environmentally Regulated Materials (as defined below)
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on, beneath, to, from or about the Real Property or any Former Real Property or
been responsible therefor, except for the generation, handling, manufacture,
treatment, storage, use, transportation, Release and Disposal, in compliance
with all applicable Environmental Laws (as defined below) and other applicable
Laws, of such substances used in the ordinary course of the Business.
(c) Except as set forth in Schedule 3.22 of the Disclosure
Schedule, no Environmentally Regulated Material has been generated, handled,
manufactured, treated, stored, used, transported, Released or Disposed Of on,
from or off the Real Property or any Former Real Property which may give rise to
a clean-up responsibility, personal injury liability or property damage claim
against Seller, or give rise to Seller being named a potentially responsible
party for any such clean-up costs, personal injuries or property damage, or
create any cause of action by any third party against Seller under any
Environmental Laws.
(d) Except as set forth in Schedule 3.22 of the Disclosure
Schedule, Seller has not received any notices or claims of any inquiries,
evaluations, investigations, remediations, violations or liabilities relating to
Environmentally Regulated Materials or Environmental Laws involving Seller, any
Subsidiary or former subsidiary, or the Real Property or any Former Real
Property.
(e) Except as set forth in Schedule 3.22 of the Disclosure
Schedule, neither the Real Property nor to Seller's knowledge any Former Real
Property contains any (1) underground or aboveground storage tanks, (2)
asbestos, (3) equipment using PCBs, (4) underground injection wells, or (5)
septic tanks into which process waste water or any Environmentally Regulated
Materials have been Disposed Of or Released.
(f) The term "ENVIRONMENTALLY REGULATED MATERIALS" means any
element, compound pollutant, contaminant, substance, material or waste, or any
mixture thereof, designated, listed, referenced, regulated or identified
pursuant to any Environmental Laws. The term "ENVIRONMENTAL LAWS" means the
National Environmental Policy Act, 42 U.S.C. ss. 4321 et seq., the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
ss. 9601 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
ss. 6901 et seq., the Federal Water Pollution Control Act, 33 U.S.C. ss.
1251 et seq., the Federal Clean Air Act, 42 U.S.C. ss. 7401 et seq., the
Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq., the Emergency
Planning and Community Right to Know Act, 42 U.S.C. P. 11001, the Hazard
Communication Act ss. 651 et seq., and the Federal Insecticide, Fungicide and
Rodenticide Act, 7 U.S.C. ss. 136, each as amended, and the regulations
thereunder and applicable state and local counterparts.
3.23 Litigation. Except as set forth in Schedule 3.23 of the Disclosure
Schedule, there is no action, order or proceeding, or to Seller's knowledge
investigation, in, before or by any court or other Authority or before or by any
arbitrator or mediator ("LITIGATION") pending, or to Seller's knowledge
threatened, (a) by or against or involving Seller or any of its properties or
any of its officers, directors, agents or employees (but only in such
capacities) or the Business, or (b) which seeks to enjoin or obtain damages in
respect of the consummation of the transactions contemplated hereby, nor to
Seller's knowledge is there any basis therefor.
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3.24 Business Generally. Except as set forth in Schedule 3.24 of the
Disclosure Schedule, there has been no event, transaction or information which
has come to the attention of Seller which, as it relates directly to the
Business, could, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect with respect to the Business.
3.25 Absence of Certain Business Practices. Neither Seller nor any
officer, employee or agent thereof, nor any other person acting on behalf of any
thereof, has, directly or indirectly, within the past five (5) years given or
agreed to give any gift or similar benefit to any customer, supplier,
governmental employee or other person who is or may be in a position to help or
hinder the Business (or assist Seller in connection with any actual or proposed
transaction related to the Business) which (a) might subject Seller or Buyer to
any damage or penalty in any civil, criminal or governmental litigation
proceeding, (b) if not given in the past, might have resulted in a Material
Adverse Effect with respect to Seller, or (c) if not continued in the future,
might have a Material Adverse Effect with respect to Seller or Buyer, or subject
Seller or Buyer to suit or penalty in any private or governmental litigation or
proceeding.
3.26 Brokers. Except as set forth in Schedule 3.26 of the Disclosure
Schedule, neither Seller nor any directors, officers or employees thereof, nor
any other person acting on behalf of any thereof, has employed any broker,
finder or financial advisor or incurred any liability for any brokerage fee or
commission, finder's fee or financial advisory fee in connection with the
transactions contemplated hereby, nor is there any basis known to Seller for any
such fee or commission to be claimed by any person or entity.
3.27 Accuracy of Information. No representation or warranty made by
Seller in this Agreement, the Disclosure Schedule or any agreement, instrument,
document, certificate, statement or letter furnished or to be furnished to Buyer
at the Closing by or on behalf of Seller in connection with any of the
transactions contemplated by this Agreement contains or will contain any untrue
statement of material fact or omits or will omit to state any material fact
necessary in order to make the statements herein or therein not misleading in
light of the circumstances in which they are made, and all of the foregoing do
or will when made completely and correctly present the information required or
purported to be set forth herein or therein.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 Buyer's Organization. Buyer is a corporation duly organized,
validly existing and in good standing under the Laws of the state of Minnesota,
and has all requisite corporate power and authority to carry on its business as
it is now being conducted, and to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby.
4.2 Due Authorization, Execution and Delivery; Effect of Agreement. The
execution, delivery and performance by Buyer of this Agreement and the Note and
the consummation by Buyer
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of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Buyer. This Agreement has been duly
and validly executed and delivered by Buyer and constitutes, and the Note when
duly and validly executed and delivered by Buyer will constitute, the valid and
binding legal obligations of Buyer, enforceable against it in accordance with
their terms, except to the extent that such enforceability (a) may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally, and (b) is subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.3 Non-Contravention. Neither the execution, delivery and performance
of this Agreement or the Note nor the consummation of the transactions
contemplated hereby or thereby will (a) violate or be in conflict with any
provision of the articles of incorporation or bylaws of Buyer, or (b) be in
conflict with, or constitute a default, however defined (or an event which, with
the giving of due notice or lapse of time, or both, would constitute such a
default), under, or cause or permit the acceleration of the maturity of, or give
rise to any right of termination, cancellation or imposition of fees or
penalties under, any debt, instrument, commitment, contract or other agreement
or obligation to which Buyer is a party or by which Buyer or any of its
properties or assets is or may be bound, or (c) result in the creation or
imposition of any Encumbrance upon any property or assets of Buyer, or (d)
violate any Laws of any Authority to which Buyer is subject.
4.4 Consents. No Consent from any Authority or any individual or other
private entity is required in connection with the execution, delivery or
performance by Buyer of this Agreement or the taking of any other action
contemplated hereby.
4.5 Litigation. There is no Litigation pending or, to Buyer's
knowledge, threatened which seeks to enjoin or obtain damages in respect of the
consummation of the transactions contemplated hereby.
ARTICLE V
COVENANTS OF SELLER
From and after the date hereof and until the Closing Date, Seller
hereby covenants and agrees with Buyer as follows:
5.1 Cooperation and Assignments. Seller will use its best efforts, and
will cooperate with Buyer, to secure all necessary consents, approvals,
authorizations, exemptions and waivers from third parties as are required in
order to enable Seller to effect the transactions contemplated hereby, and
otherwise will use its best efforts to cause the consummation of such
transactions in accordance with the terms and conditions hereof, provided that
Seller will not be obligated to incur any liability or expense in connection
therewith, except the cost and expense of its employees, agents and
representatives engaged in such efforts or as otherwise expressly set forth
herein.
5.2 Conduct of Business. Except as otherwise may be contemplated by
this Agreement or any of the documents listed in the Disclosure Schedule and
except as Buyer otherwise may
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consent to in writing (which consent will not be unreasonably withheld), in
consultation with Buyer Seller will (a) operate the Business in the ordinary
course in all material respects, (b) use its best efforts to preserve the
Business as a whole intact, (c) use its best efforts to continue in effect all
material existing policies of insurance (or comparable insurance) with
third-party carriers of or relating to the Business, (d) use its best efforts to
keep available the services of the present officers, employees and agents of the
Business, (e) use its best efforts to preserve its relationships with its
material suppliers, customers, licensors and licensees and others having
material business dealings with it such that the Business will not be
substantially impaired, and (f) not take any action which would result in a
breach of the representations and warranties contained in Section 3.6 or
otherwise contained in Article III as though made on and as of the Closing Date.
5.3 Access. Seller will provide Buyer with such information as Buyer
from time to time reasonably may request with respect to the Business and to
personnel of Seller and the transactions contemplated by this Agreement, and
will permit Buyer and its representatives reasonable access, during regular
business hours and upon reasonable notice, to the properties, books and records
of the Business and to personnel of Seller, as Buyer from time to time
reasonably may request.
5.4 Division Audited Financial Statements. On or before Closing, Seller
will deliver to Buyer an audited balance sheet of the Division as of December
31, 1997 and related audited statement of operations and retained earnings and
cash flows of the Division for the year then ended.
5.5 No Solicitation. Seller will not and will cause its directors,
officers, employees, agents and representatives not to encourage, solicit,
initiate or enter into, directly or indirectly, any discussions or negotiations
concerning any disposition (through a sale of assets, sale of stock, merger,
consolidation, exchange or otherwise) of all or substantially all of the Assets
or all or substantially all of the assets or capital stock of Seller (other than
pursuant to this Agreement), or any proposal therefor, or furnish or cause to be
furnished any nonpublic information concerning the Business or the assets or
capital stock of Seller to any third party in connection with any transaction or
proposed transaction involving the acquisition of the Assets or the assets or
capital stock of Seller by any third party (any such proposed disposition being
hereinafter referred to as an "ALTERNATIVE TRANSACTION"), provided that nothing
contained herein will restrict any thereof from taking any action determined in
good faith by Seller upon advise of counsel to be required by the fiduciary
duties of the members of Seller's board of directors. Seller will promptly
inform Buyer of any inquiry (including the terms and the identity of the third
party making such inquiry) which it receives in respect of an Alternative
Transaction and furnish to Buyer a copy of any such written inquiry.
5.6 Topping Fee. In the event this Agreement is terminated and within
one (1) year thereafter substantially all of the Assets or substantially all of
the assets or capital stock of Seller are sold (through a sale of assets, sale
of stock, merger, consolidation, exchange or otherwise) pursuant to an
Alternative Transaction, and provided this Agreement has not been terminated
because of a material breach of Buyer's obligations, representations or
warranties hereunder, thereupon Seller will pay to Buyer Eight Hundred Thousand
Dollars ($800,000) in immediately available funds.
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ARTICLE VI
COVENANTS OF BUYER
From and after the date hereof and until the Closing Date, Buyer hereby
covenants and agrees with Seller as follows:
6.1 Cooperation and Assumption. Buyer will use its best efforts, and
will cooperate with Seller, to secure all necessary consents, approvals,
authorizations, exemptions and waivers from third parties as are required in
order to enable Buyer to effect the transactions contemplated hereby, and will
otherwise use its best efforts to cause the consummation of the transactions
contemplated hereby in accordance with the terms and conditions hereof, provided
that Buyer will not be obligated to incur any liability or expense in connection
therewith, except the cost and expense of its employees and representatives
engaged in such efforts or as otherwise expressly set forth herein.
ARTICLE VII
ADDITIONAL COVENANTS
7.1 Books and Records; Personnel. For a period of seven (7) years after
the Closing (or such longer period as may be required by any governmental agency
or ongoing Litigation or in connection with any administrative proceeding):
(a) Buyer will not dispose of or destroy any of the business
records and files of the Business. If Buyer wishes to dispose of or destroy such
records and files after that time, it will first give thirty (30) days' prior
written notice to Seller and Seller will have the right, at its option and
expense, upon prior written notice to Buyer within such thirty (30) day period,
to take possession of the records and files within sixty (60) days after the
date of Seller's notice to Buyer.
(b) Buyer will allow Seller and its representatives access,
when there is a legitimate business purpose not injurious to Buyer, to all
business records and files of the Business which are transferred to Buyer in
connection herewith, during regular business hours and upon reasonable notice at
Buyer's principal place of business or at any location where such records are
stored, and Seller will have the right, at its own expense, to make copies of
any such records and files; provided, however, that any such access or copying
will be had or done in such a manner so as not to interfere with the normal
conduct of Buyer's business or operations.
(c) Buyer will make available to Seller, upon written request
and at Seller's expense, personnel of the Business to assist Seller in locating
and obtaining records and files of the Business or whose assistance or
participation is reasonably required by Seller in anticipation of, or
preparation for, existing or future Litigation, tax return preparation or other
matters in which Seller or any of its affiliates are involved and which is
related to the Business, provided that Buyer will not be obligated to provide
such personnel to the extent that Buyer, in its reasonable discretion, believes
that such assistance would adversely affect the operations of the Business.
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7.2 Further Assurances. At any time or from time to time after the
Closing Date, either party will, at the request of the other party and at such
other party's expense, execute and deliver any further instruments or documents
and take all such further action as such party reasonably may request in order
to consummate and make effective the transactions contemplated by this
Agreement.
7.3 Confidentiality Agreement and Noncompetition Covenant of Seller
After Closing.
(a) From and after the Closing Date, except as otherwise
consented to by Buyer in writing, (1) Seller will not directly or indirectly
disclose or use in a manner adverse to Buyer any Business Confidential
Information (as defined below) except as required by the terms of a valid and
effective subpoena or order issued by a court of competent jurisdiction or by a
governmental body, (2) Business Confidential Information will be the exclusive
property of Buyer and, any time on or after the Closing Date, if requested by
Buyer, Seller will promptly deliver to Buyer all Business Confidential
Information, including all copies thereof, which are in the possession, or under
the control, of Seller or any of its agents or representatives, without making
or retaining any copies or extracts thereof, and (3) if Seller or any of its
agents or representatives receives a request to disclose all or any part of
Business Confidential Information, Seller will (A) immediately notify Buyer of
the existence, terms and circumstances surrounding such request, (B) consult
with Buyer on the advisability of taking legally available steps to resist or
narrow such request, and (C) if disclosure of such information is required, and
at Buyer's cost and expense, exercise its best efforts to obtain an order or
other reliable assurance that confidential treatment will be accorded such
portion of the disclosed information which Buyer so designates.
(b) "BUSINESS CONFIDENTIAL INFORMATION" means any and all
information relating to the management, operations, finances, products, trade
secrets, technology or services of Seller, including but not limited to any and
all financial data, computer programs and systems, computer based information,
plans, projections, existing and proposed and contemplated projects or
investments, formulae, processes, methods, products, manuals, drawings, supplier
lists, customer lists, purchase and sales records, marketing information,
commitments, correspondence and other information relating to the Business,
whether written, oral or computer generated, other than such information from
and after such time as it may be or become lawfully available to the general
public through no fault of Seller.
(c) Seller covenants that for a period of three (3) years
after Closing, it will not, and will cause each of its affiliates not to,
directly or indirectly, as an owner, operator, employee, agent, consultant or
otherwise, be involved in any business which competes with the Business or which
solicits the employment of any personnel employed by Seller on or within twelve
(12) months prior to the Closing Date.
(d) The covenants and undertakings contained in this Section
7.3 relate to matters which may be of a special, unique and extraordinary
character and a violation of any of the terms of this Section 7.3 may cause
irreparable injury to Buyer, the amount of which may be impossible to estimate
or determine and for which adequate compensation may not be available.
Therefore, Buyer may be entitled to an injunction, restraining order or other
equitable relief from a court of
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competent jurisdiction, restraining any violation or threatened violation of any
such terms by Seller and such other persons as the court orders.
7.4 Use of Name. Buyer will have the right to use WEB Technology or any
derivative there of as a part of the name of the Business as operated by Buyer
or in any product designation of the Business.
7.5 Maintenance of Health Plan. Seller will maintain a group health
plan for at least six (6) months after the Closing Date and will offer COBRA
continuation coverage to all eligible employees of Seller whose employment
terminates as a result of the sale of Assets hereunder to Buyer.
ARTICLE VIII
REGISTRATION OF SHARES
8.1 Registration.
(a) Aetrium Incorporated will prepare and file a registration
statement covering the Registrable Securities on Form S-3 (the "REGISTRATION
STATEMENT") promptly (and in any event within five (5) business days) following
the Closing Date and will use its best efforts to cause the Registration
Statement to become and remain effective for twelve (12) months following the
Closing Date (the "EFFECTIVENESS PERIOD"). Aetrium Incorporated will be
obligated to prepare, file and cause to become effective only one Registration
Statement pursuant to this Section 8.1. "REGISTRABLE SECURITIES" means any
Shares and any shares of the common stock of Aetrium Incorporated issued as a
dividend, stock split, reclassification, recapitalization or other distribution
with respect to, or in exchange for or replacement of, any Registrable
Securities; provided, however, that Registrable Securities will not include (1)
shares that have been sold to the public either pursuant to the Registration
Statement or Rule 144, or (2) shares sold in a transaction in which the
registration rights conferred by this Article VIII are transferred in violation
of Section 8.7 hereof. The "SECURITIES ACT" means the Securities Act of 1933, as
amended, or any similar successor statute, and the rules and regulations
thereunder, as the same are in effect from time to time. "RULE 144" means Rule
144 promulgated by the Commission under the Securities Act, as such rule may be
amended from time to time, or any successor rule thereto. The "COMMISSION" means
the Securities and Exchange Commission or any other federal agency at the time
administering the Securities Act.
(b) Aetrium Incorporated may delay the filing the of the
Registration Statement for not more than thirty (30) days if in the good faith
judgment of the Board of Directors of Aetrium Incorporated (the "BOARD"), there
is a material development relating to the condition (financial or otherwise) of
Aetrium Incorporated that has not been disclosed to the general public and the
Board determines that, under such circumstances, it would be in Aetrium
Incorporated's best interests to delay such registration.
8.2 Procedures for Sale of Registrable Securities. "HOLDER" means each
Share Designee with respect to the Shares issued to such Share Designee pursuant
to Section 1.8(c) and any other
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Registrable Securities issued with respect thereto and each transferree of the
registration rights under this Article VIII with respect to such Registrable
Securities transferred in compliance with Section 8.7 hereof. Each time any
Holder desires to offer and sell any Registrable Securities pursuant to the
Registration Statement, the Holder agrees to comply with the following
procedures:
(a) The Holder will provide Aetrium Incorporated with a Sale
Notice prior to the sale of any Registrable Securities. "SALE NOTICE" means a
written notice provided to Aetrium Incorporated which specifies (1) the name,
address and facsimile number of or for the Holder, and (2) the number of
Registrable Securities such Holder desires to sell.
(b) Upon receipt of the Sale Notice, Aetrium Incorporated will
take the following steps:
(1) If Aetrium Incorporated determines that the
Registration Statement, the prospectus forming a part thereof
and any amendments and supplements thereto contain current and
updated information and do not contain any untrue statement of
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not
misleading, Aetrium Incorporated will promptly (and in any
event within five (5) business days of receipt of the Sale
Notice for any Holder entering into a Right of First Refusal
Agreement (as hereinafter defined) and otherwise within one
(1) business day of receipt of the Sale Notice) notify the
Holder that such Holder may sell the Registrable Securities.
If the Holder does not sell the Registrable Securities within
thirty (30) days after such notification from Aetrium
Incorporated, however, the Holder will once again become
subject to the procedures described in this Section 8.2 and
may not sell the Registrable Securities without first
complying with the procedures described herein.
(2) If Aetrium Incorporated determines that the
Registration Statement, the prospectus forming a part thereof
or any amendments or supplements thereto do not contain
current and updated information or contain any untrue
statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which
they were made, not misleading, Aetrium Incorporated will
promptly (and in any event within five (5) business days of
receipt of the Sale Notice for any Holder entering into a
Right of First Refusal Agreement and otherwise within one (1)
business day of receipt of the Sale Notice) notify the Holder
of such determination, and within thirty (30) days thereafter
will prepare and file with the Commission such amendments or
supplements thereto as may be necessary so that the
Registration Statement, the prospectus forming a part thereof
and any amendments and supplements thereto contain current and
updated information and do not contain any untrue statement of
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not
misleading. Promptly after any such amendments or supplements
have been filed and, if applicable, declared effective,
Aetrium Incorporated will notify the Holder that such Holder
may sell the Registrable Securities. If the Holder does not
sell the Registrable Securities within thirty (30) days after
such notification from Aetrium Incorporated, however, the
Holder will once again becomes subject to the procedures
described in this Section 8.2 and may not sell the Registrable
Securities without first complying with the procedures
described herein.
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(c) Only after Aetrium Incorporated has reviewed the Registration
Statement and provided the Holder with the written notification provided in
Section 8.2(b) above may the Holder sell the Registrable Securities pursuant to
the Sale Notice.
(d) Any notice to be given hereunder by a Holder to Aetrium
Incorporated will be in writing and delivered personally or by telephonic
facsimile transmission or sent by registered or certified mail, postage prepaid
(and if by telephonic facsimile transmission with a copy sent by mail), to:
Aetrium Incorporated
2350 Helen Street
North St. Paul, Minnesota 55109
Attn: Paul H. Askegaard
Facsimile No.: (612) 704-1805
or at such other address as may be specified by notice to the Holder. Any notice
to be given hereunder by Aetrium Incorporated to the Holder will be in writing
and delivered by telephonic facsimile transmission to the facsimile number
provided by the Holder in the applicable Sale Notice. Any notice which is
delivered personally or by telephonic facsimile transmission in the manner
provided herein will be deemed to have been duly given to the party to whom it
is directed upon actual receipt by such party if delivered personally or upon
completion of facsimile transmission. Any notice which is addressed and mailed
in the manner herein provided will be conclusively presumed to have been duly
given to the party to which it is addressed at the close of business, local time
of the recipient, on the third day after the day it is so placed in the mail.
8.3 Restrictions on Sale of Registrable Securities. Notwithstanding any
other provision in this Article VIII to the contrary, Holders are prohibited
from selling any Registrable Securities in the circumstances described below,
and any sale made in such circumstances will be deemed a breach of this
Agreement and may constitute a violation of the Securities Act, which could
subject such Holder to civil and criminal sanctions:
(a) Holders may not sell Registrable Securities during the period
that commences on the seventh day of the last month of each of Aetrium
Incorporated's fiscal quarters and ends on the third business day after Aetrium
Incorporated releases financial results for such quarter.
(b) Holders may not sell any Registrable Securities if the
Registration Statement, the prospectus forming a part thereof or any amendments
or supplements thereto, do not contain current and updated information or
contain any untrue statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.
8.4 Expenses. With respect to registration of Registrable Securities
pursuant to this Article VIII, Aetrium Incorporated will bear the following
fees, costs and expenses: all registration, filing and NASD fees, printing
expenses, fees and disbursements of counsel and accountants for Aetrium
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Incorporated, internal expenses of Aetrium Incorporated, and other expenses of
complying with state securities or blue sky laws of any jurisdictions in which
the Registrable Securities are to be registered or qualified. The Holder will
bear the following fees, costs and expenses: discounts and commissions, fees and
disbursements of counsel and accountants for the Holder and any other expenses
incurred by the Holder not expressly included above.
8.5 Indemnification.
(a) Aetrium Incorporated will indemnify and hold harmless
Seller, each Holder, and each person, if any, who controls such Holder within
the meaning of the Securities Act, from and against, and will reimburse such
Holder and each such controlling person with respect to, any and all loss,
damage, liability, cost and expense to which such Holder or any such controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any untrue
statement or alleged untrue statement of any material fact contained in such
Registration Statement, any prospectus forming a part thereof or any amendments
or supplements thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading; provided, however, that Aetrium
Incorporated will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expense arises out of or is based upon (1) an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such Holder or such controlling
person in writing specifically for use in the preparation thereof, or (2) the
failure of such Holder to deliver a prospectus and any amendments or supplements
thereto in accordance with the requirements of this Article VIII and the
Securities Act.
(b) Seller and each holder jointly and severally will
indemnify and hold harmless Aetrium Incorporated, its directors and officers,
and any controlling person from and against, and will reimburse Aetrium
Incorporated, its directors and officers, and any controlling person with
respect to, any and all loss, damage, liability, cost or expense to which
Aetrium Incorporated or any controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue or alleged untrue statement of any material
fact contained in such Registration Statement, any prospectus forming a part
thereof or any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading, in each case
to the extent, but only to the extent, that any such loss, damage, liability,
cost or expense arises out of or is based upon (1) an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in strict conformity with written information furnished by such Holder
specifically for use in the preparation thereof, or (2) the failure of such
Holder to deliver a prospectus and any amendments or supplements thereto in
accordance with the requirements of this Article VIII and the Securities Act.
(c) Promptly after receipt by an indemnified party pursuant to
the provisions of Section 8.5(a) or (b) hereof of notice of the commencement of
any action involving the subject matter of the foregoing indemnity provisions,
such indemnified party will, if a claim thereof is to
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be made against the indemnifying party pursuant to the provisions of such
Section 8.5(a) or (b), promptly notify the indemnifying party of the
commencement thereof. In case such action is brought against any indemnified
party and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will have the right to participate in, and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any action
include both the indemnified party and the indemnifying party and the
representation of both parties by the same counsel would be inappropriate due to
a conflict of interest between them, the indemnified party or parties will have
the right to select separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party pursuant to the provisions of such Section 8.5(a) or (b) for any legal or
other expense subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation, unless (1) the
indemnified party has employed counsel in accordance with the proviso of the
preceding sentence, (2) the indemnifying party has not employed counsel
reasonably satisfactory to the indemnified party to represent the indemnifying
party within a reasonable time after the notice of the commencement of the
action, or (3) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party. It is
understood that the indemnifying party will not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
fees and expenses of more than one separate firm for all indemnified parties.
8.6 Cooperation; Information by Holders. Each Holder of Registrable
Securities covered by the Registration Statement agrees to cooperate with all
reasonable requests by Aetrium Incorporated necessary to effectuate the purposes
of this Article VIII, including providing Aetrium Incorporated on a timely basis
with any required notices and with all information necessary in connection with
any registration or compliance described herein.
8.7 Transfer of Registration Rights. The registration rights provided
for herein may not be transferred or assigned in connection with the sale or
transfer of the Registrable Securities without the written consent of Aetrium
Incorporated. In the event Seller is a Share Designee, consent will not be
withheld for a transfer of registration rights with respect to Shares for which
Seller is a Share Designee to a shareholder of Seller in connection with
distribution of such Shares to such shareholder.
8.8 Termination of Registration Rights. The registration rights
described herein will terminate upon expiration of the Effectiveness Period.
ARTICLE IX
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to consummate the purchase of the Assets under
this Agreement will be subject to the satisfaction (or waiver by Buyer) on or
prior to the Closing Date of all of the following conditions:
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9.1 Representations, Warranties and Covenants of Seller. Seller will
have complied in all material respects with all of their agreements and
covenants contained herein to be performed at or prior to the Closing Date, and
all the representations and warranties of Seller contained herein will be true
in all material respects on and as of the Closing Date with the same effect as
though made on and as of the Closing Date, except (a) as otherwise contemplated
hereby, and (b) to the extent that such representations and warranties were made
as of a specified date (and as to such representations and warranties the same
continue on the Closing Date to have been true as of the specified date). Buyer
will have received a certificate of Seller, dated as of the Closing Date and
signed by an officer of Seller, certifying as to the fulfillment of the
conditions set forth in this Section 9.1.
9.2 No Prohibition. No statute, rule or regulation or order of any
court or other Authority will be in effect which prohibits Buyer from
consummating the transactions contemplated hereby.
9.3 Further Action. All consents, approvals, authorizations, exemptions
and waivers from third parties that are required in order to enable Buyer to
consummate the transactions contemplated hereby will have been obtained (except
where the failure to obtain any such consents, approvals, authorizations,
exemptions and waivers would not have a Material Adverse Effect with respect to
the Business).
9.4 Shareholder Agreements. The shareholders of Seller scheduled on
Exhibit D hereto holding not less than seventy-five percent (75%) of the
outstanding capital stock of Seller will have entered into agreements with
Aetrium Incorporated (each a "RIGHT OF FIRST REFUSAL AGREEMENT"), each in the
form of Exhibit E hereto, providing for a first right of refusal to Aetrium
Incorporated on the sale of any Shares within two (2) years after Closing, as
provided therein.
9.5 Williams Employment Agreement. Keith E. Williams will have entered
into an employment agreement with Buyer in the form of Exhibit F hereto.
9.6 KRESS Agreement. Buyer will have entered into an agreement with
KRESS Technologies, L.P. on mutually acceptable terms providing for interim use
by KRESS Technologies, L.P. of the facilities occupied by the Division,
termination of such use of facilities, and continued supply of parts for the
Division at existing prices and delivery terms, with provision for reasonable
price adjustments over time.
9.7 WEB Automation Agreement. Buyer will have entered into an agreement
with WEB Automation, L.P. on mutually acceptable terms providing for continued
supply of parts for the Division at existing prices and delivery terms, with
provision for reasonable price adjustments over time.
9.8 Fluids Business Sublease. Buyer and Seller will have entered into
an agreement on mutually acceptable terms providing for the continued use of the
facilities occupied by the Division by Seller's fluid distribution business.
9.9 Deliveries. Seller will have made or caused to be made delivery to
Buyer of the items set forth in Section 2.2 hereof.
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ARTICLE X
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to consummate the sale of the Assets under
this Agreement will be subject to the satisfaction (or waiver by Seller) on or
prior to the Closing Date of all of the following conditions:
10.1 Representations, Warranties and Covenants of Buyer. Buyer will
have complied in all material respects with all of its agreements and covenants
contained herein to be performed at or prior to the Closing Date, and all of the
representations and warranties of Buyer contained herein will be true in all
material respects on and as of the Closing Date with the same effect as though
made on and as of the Closing Date, except (a) as otherwise contemplated hereby,
and (b) to the extent that such representations and warranties were made as of a
specified date (and as to such representations and warranties the same continue
on the Closing Date to have been true as of the specified date). Seller will
have received a certificate of Buyer, dated as of the Closing Date and signed by
an officer of Buyer, certifying as to the fulfillment of the conditions set
forth in this Section 10.1.
10.2 No Prohibition. No statute, rule or regulation or order of any
court or other Authority will be in effect which prohibits Seller from
consummating the transactions contemplated hereby.
10.3 Further Action. All consents, approvals, authorizations,
exemptions and waivers from third parties that are required in order to enable
Seller to consummate the transactions contemplated hereby will have been
obtained (except where the failure to obtain any such actions, consents,
approvals, authorizations, exemptions and waivers would not have a Material
Adverse Effect with respect to the Business).
10.4 Williams Employment Agreement. Keith E. Williams will have entered
into an employment agreement with Buyer in the form of Exhibit F hereto.
10.5 KRESS Agreement. Buyer will have entered into an agreement with
KRESS Technologies, L.P. on mutually acceptable terms providing for interim use
by KRESS Technologies, L.P. of the facilities occupied by the Division,
termination of such use of facilities, and continued supply of parts for the
Division at existing prices and delivery terms, with provision for reasonable
price adjustments over time.
10.6 WEB Automation Agreement. Buyer will have entered into an
agreement with WEB Automation, L.P. on mutually acceptable terms providing for
continued supply of parts for the Division at existing prices and delivery
terms, with provision for reasonable price adjustments over time.
10.7 Fluids Business Sublease. Buyer and Seller will have entered into
an agreement on mutually acceptable terms providing for the continued use of the
facilities occupied by the Division by Seller's fluid distribution business.
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10.8 Deliveries. Buyer will have made or caused to be made delivery to
Seller of the items set forth in Section 2.3 hereof.
ARTICLE XI
INDEMNIFICATION AND RELATED MATTERS
11.1 Indemnification by Seller. Subject to the provisions of this
Article XI, Seller will indemnify and hold harmless Buyer and each director,
officer, employee, stockholder, partner or affiliate thereof from and against
any and all damages, loss, cost or expense (including reasonable attorney's fees
and expenses actually incurred) (collectively, "LOSS") suffered by reason of,
arising out of or resulting from (a) any misrepresentation or breach of warranty
made by Seller in or pursuant to this Agreement (other than, with respect to any
such director, officer or employee who is an officer or director of Seller on
the date of this Agreement, any such misrepresentation or breach of warranty
known to such officer or director on the Closing Date), (b) any failure by
Seller to fulfill any covenants or agreements under this Agreement, or (c) any
and all liabilities of Seller not expressly assumed by Buyer hereunder, or third
party claims therefor.
11.2 Indemnification by Buyer. Buyer will indemnify and hold harmless
Seller and its officers and directors from and against any and all Loss suffered
by reason of, arising out of or resulting from (a) any material
misrepresentation or breach of warranty made by Buyer in or pursuant to this
Agreement, (b) any failure by Buyer to fulfill any covenants or agreements under
this Agreement, or (c) any and all Assumed Liabilities, or third party claims
therefor.
11.3 Notice of Indemnification. In the event any legal proceeding is
threatened or instituted or any claim or demand is asserted by any person
(including a party hereto) in respect of which payment may be sought by one
party hereto from the other party under the provisions of this Article XI, the
party seeking indemnification (the "INDEMNITEE") will promptly cause written
notice of the assertion of any such claim of which it has knowledge which is
covered by this indemnity to be forwarded to the other party (the "INDEMNITOR").
Any notice of a claim by reason of any of the representations, warranties or
covenants contained in this Agreement will state specifically the
representation, warranty or covenant with respect to which the claim is made,
the facts giving rise to an alleged basis for the claim, and the amount of the
liability asserted against the Indemnitor by reason of the claim.
11.4 Indemnification Procedure for Third-Party Claims. In the event of
the initiation of any legal proceeding against an Indemnitee by a third party,
the Indemnitor will have the absolute right after the receipt of notice, at its
option and at its own expense, to be represented by counsel of its choice, and
to defend against, negotiate, settle or otherwise deal with any proceeding,
claim, or demand which relates to any loss, liability or damage indemnified
against hereunder; provided, however, that the Indemnitee may participate in any
such proceeding with counsel of its choice and at its expense. The parties will
cooperate fully with each other in connection with the defense, negotiation or
settlement of any such legal proceeding, claim or demand. To the extent the
Indemnitor elects not to defend such proceeding, claim or demand, and the
Indemnitee defends against or otherwise deals with any such proceeding, claim or
demand, the Indemnitee may retain
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counsel, at the expense of the Indemnitor, and control the defense of such
proceeding. Neither the Indemnitor nor the Indemnitee may settle any such
proceeding without the consent of the other party, such consent not to be
unreasonably withheld. After any final judgment or award has been rendered by a
court, arbitration board or administrative agency of competent jurisdiction and
the time in which to appeal therefrom has expired, or a settlement has been
consummated, or the Indemnitee and the Indemnitor have arrived at a mutually
binding agreement with respect to each separate matter alleged to be indemnified
by the Indemnitor hereunder, the Indemnitee will forward to the Indemnitor
notice of any sums due and owing by it with respect to such matter and the
Indemnitor will pay all of the sums so owing to the Indemnitee by wire transfer,
certified or bank cashier's check within thirty (30) days after the date of such
notice. Notwithstanding the foregoing, the provisions of Section 8.5 will govern
all indemnification claims made thereunder.
11.5 Survival of Representations, Warranties and Covenants. The
representations and warranties made in this Agreement and the covenants and
agreements contained herein to be performed or complied with at or prior to the
Closing Date will survive for twenty-four (24) months after the Closing Date,
and no legal action [or arbitration proceeding] may be commenced thereafter with
respect to any alleged breach thereof.
11.6 Exclusive Remedy. Except for equitable relief as provided under
Section 7.3, the exclusive remedy available to a party hereto in respect of the
matters covered by Section 10.1 or Section 10.2 hereof is to proceed in the
manner and subject to the limitations contained in this Article X (or Section
8.5 where applicable), provided that nothing herein will limit the rights and
remedies of Buyer under the Delaware General Corporation Law and common law
relevant thereto against the shareholders of Seller with respect to the
liabilities and obligations of Seller hereunder, and provided further that
nothing will limit the rights and remedies of each party with respect to any
intentionally wrongful acts of the other party.
ARTICLE XII
TERMINATION PRIOR TO CLOSING
12.1 Termination. This Agreement may be terminated at any time prior to
the Closing:
(a) by the mutual written consent of Buyer and Seller; or
(b) by either Seller or Buyer in writing (provided the
conditions to such party's obligations stated in the applicable sections of
Article IX or X are not then satisfied or waived) if the Closing has not
occurred on or before April 30, 1998; or
(c) by either Seller or Buyer in writing, if there is in
effect a non-appealable order of a court of competent jurisdiction prohibiting
the consummation of the transactions contemplated hereby.
12.2 Effect on Obligations. Termination of this Agreement pursuant to
this Article will terminate all obligations of the parties hereunder, provided,
however, that termination pursuant to
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clause (b) of Section 12.1 hereof will not relieve any defaulting or breaching
party from any liability to the other party hereto, and provided, further, that
the provisions of this Section 12.2 and Article XIII will survive termination of
this Agreement.
ARTICLE XIII
MISCELLANEOUS
13.1 Entire Agreement. This Agreement (including the Exhibits and the
Disclosure Schedule delivered pursuant hereto) constitutes the entire agreement
of the parties with respect to the matters provided for herein and supersedes
all prior and contemporaneous agreements, understandings, negotiations and
discussions, whether oral or written, of the parties. No amendment, modification
or alteration of the terms or provisions of this Agreement will be binding
unless the same is in writing and duly executed by the parties hereto.
13.2 Successors and Assigns. The terms and conditions of this Agreement
will inure to the benefit of and be binding upon the respective successors and
permitted assigns of the parties hereto. This Agreement may not be assigned by
any party without the prior written consent of the other party hereto, except
that Buyer may, at its election, assign its rights under this Agreement to any
direct or indirect wholly-owned subsidiary. Notwithstanding the foregoing, no
assignment of this Agreement or any of the rights or obligations hereof by Buyer
will relieve Buyer of its obligations under this Agreement to Seller and, upon
any such assignment, the representations, warranties, covenants and agreements
contained in this Agreement will be deemed to have been made by Buyer's assignee
as well as by Buyer. Any attempted assignment of this Agreement contrary to the
terms hereof will be null and void and of no force or effect.
13.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which will for all purposes be deemed to be an original
and all of which will constitute the same instrument.
13.4 Headings. The headings of the articles and sections of this
Agreement are included for convenience only and will not be deemed to constitute
part of this Agreement or to affect the construction hereof.
13.5 Modifications and Waivers. No waiver of any of the terms or
conditions of this Agreement or any right hereunder will be effective unless
given in a signed writing by the party entitled to the benefits thereof. No
waiver of any of the provisions of this Agreement or any rights hereunder will
be deemed to or will constitute a waiver of any other provisions hereof or
rights hereunder (whether or not similar). No failure or delay on the part of a
party in exercising any right hereunder will operate as a waiver of, or impair,
any such right. No single or partial exercise of any such right will preclude
any other or further exercise thereof or the exercise of any other right.
13.6 Broker's Fees. Each of the parties hereto represents and warrants
to the other that it has had no dealings with any broker or finder in connection
with the transactions contemplated by this Agreement. Seller will indemnify and
hold harmless Buyer from and against any and all liability
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to which Buyer may be subjected by reason of any broker's or finder's fee with
respect to the transactions contemplated hereby to the extent such fee is
attributable to any action undertaken by or on behalf of Seller. Buyer will
indemnify and hold harmless Seller from and against any and all liability to
which Seller may be subjected by reason of any broker's or finder's fee with
respect to the transaction contemplated hereby to the extent such fee is
attributable to any action undertaken by or on behalf of Buyer.
13.7 Expenses.
(a) Seller will pay all costs and expenses incurred by or on
behalf of Seller, and Buyer will pay all costs and expenses incurred by or on
behalf of it, in connection with this Agreement, the negotiations in connection
herewith, and the transactions contemplated hereby, including without limitation
fees and expenses of their respective brokers, finders, financial consultants,
accountants and counsel, and including with respect to Seller all costs and
expenses incurred in providing audited financial statements as required under
Section 5.4.
(b) If any dispute between Seller and Buyer, either occurring
under, relating to or in connection with any of the provisions of this
Agreement, is submitted to a court, arbitrator or other appropriate tribunal,
then all costs and expenses of the parties (including tribunal costs and
reasonable attorneys' fees) will be paid by the party against whom a
determination by such court, arbitrator or other tribunal is made or, in the
absence of a determination wholly against one party, as such court, arbitrator
or other tribunal directs.
13.8 Notices. Any notice, request, instruction or other document to be
given hereunder by any party hereto to any other party will be in writing and
delivered personally or by telephonic facsimile transmission or sent by
registered or certified mail, postage prepaid (and if by telephonic facsimile
transmission with a copy sent by mail),
if to Seller to:
WEB Technology, Inc.
10501 Markison Road
Dallas, Texas 75238
Attn: Keith E. Williams
Facsimile No.: (214) 343-8958
with a copy to:
Boyd-Veigel, P.C.
218 E. Louisiana
McKinney, Texas 75069
Attn: Jerry A. Kagay
Facsimile No.: (972) 542-4532
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if to Buyer to:
Aetrium Incorporated
2350 Helen Street
North St. Paul, Minnesota 55109
Attn: Joseph C. Levesque
Facsimile No.: (612) 704-1805
with a copy to:
Oppenheimer Wolff & Donnelly
3400 Plaza VII Building
45 South Seventh Street
Minneapolis, Minnesota 55402
Attn: Thomas C. Thomas
Facsimile No.: (612) 607-7100
or at such other address for a party as may be specified by like notice. Any
notice which is delivered personally or by telephonic facsimile transmission in
the manner provided herein will be deemed to have been duly given to the party
to whom it is directed upon actual receipt by such party (or its agent for
notices hereunder) if delivered personally or upon completion of facsimile
transmission. Any notice which is addressed and mailed in the manner herein
provided will be conclusively presumed to have been duly given to the party to
which it is addressed at the close of business, local time of the recipient, on
the third day after the day it is so placed in the mail.
13.9 Arbitration. Subject to the last sentence of this Section, any
controversy or claim arising out of or relating to any provisions of this
Agreement or the breach hereof, unless resolved by mutual agreement of the
parties, will be finally settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in effect
on the effective date of this Agreement by a single arbitrator appointed in
accordance with said Rules. The determination of the arbitrator will be final
and binding upon the parties to the arbitration and judgment upon the award
rendered by the arbitrator will be entered in any court of competent
jurisdiction. The place of arbitration will be Minneapolis, Minnesota.
Notwithstanding the foregoing, either party may seek injunctive relief with
respect to any controversy or claim arising out of or relating to any provisions
of this Agreement in any court of competent jurisdiction.
13.10 Governing Law; Consent to Jurisdiction. This Agreement will be
construed in accordance with and governed by the laws of the state of Minnesota
applicable to agreements made and to be performed in such jurisdiction without
reference to conflicts of law principles. Each of Buyer and Seller irrevocably
consents that any legal action or proceeding against it under, arising out of or
in any manner relating to this Agreement or any other agreement, document or
instrument arising out of or executed in connection with this Agreement may be
brought only in an arbitration proceeding as provided in Section 13.9 or in a
court of the state of Minnesota or in the United States District Court for
Minnesota. Each of Buyer and Seller by the execution and delivery of this
Agreement, expressly and irrevocably assents and submits to the personal
jurisdiction of the
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arbitrators selected pursuant to Section 13.9 or any of such courts in any such
action or proceeding. Each of Buyer and Seller further irrevocably consents to
the service of any complaint, summons, notice or other process relating to any
such action or proceeding by delivery thereof to it by hand or by mail in the
manner provided for in Section 13.8 hereof. Each of Buyer and Seller hereby
expressly and irrevocably waives any claim or defense in any action or
proceeding based on any alleged lack of personal jurisdiction, improper venue or
forum non conveniens or any similar basis.
13.11 Confidentiality and Nonsolicitation.
(a) "SELLER CONFIDENTIAL INFORMATION" means information
received by Buyer or any of its agents, directors, officers, employees, counsel,
consultants, affiliates or advisors ("REPRESENTATIVES") from Seller or its
Representatives in the course of Buyer's investigation of Seller and negotiation
and performance of this Agreement, including without limitation trade secret and
other proprietary technical, financial and other information relating to the
Business or Seller's products, whether past, present or anticipated, including
information about Seller's research, development, manufacturing, purchasing,
accounting, engineering, marketing, selling or servicing, and any analyses,
compilations, studies, materials, memoranda, data, notes or documents prepared
by Buyer or its Representatives and concerning such information received by
Buyer or its Representatives.
(b) The Seller Confidential Information will be kept
confidential and will not, without the prior written consent of Seller, be
disclosed by Buyer or its Representatives in any manner whatsoever, in whole or
in part, and will not be used by Buyer or its Representatives other than in
connection with the transactions contemplated hereunder. The Seller Confidential
Information will be disclosed by Buyer and its Representatives only to Buyer's
Representatives who have a "need to know" such Seller Confidential Information
and who have been informed by Buyer of the confidential nature of the Seller
Confidential Information and who have first agreed to be bound by the terms and
conditions of this Section 13.11.
(c) Immediately upon termination of this Agreement, the Seller
Confidential Information which consists of analyses, compilations, studies,
material, memoranda, data, notes or other documents prepared by Buyer or its
Representatives in that capacity will be destroyed and such destruction will be
certified in writing to Seller by an authorized officer supervising such
destruction, and all other Seller Confidential Information will be returned to
Seller without Buyer retaining any copies thereof.
(d) In the event that Buyer or anyone to whom Buyer transmits
the Seller Confidential Information pursuant to the provisions of this Section
13.11 becomes legally compelled to disclose any of the Seller Confidential
Information, Buyer will provide Seller with prompt notice before such Seller
Confidential Information is disclosed so that Seller may seek a protective order
or other appropriate remedy and/or waive compliance with the provisions of this
Section 13.11. In the event that such protective order or other remedy is not
obtained, Buyer will furnish only that portion of the Seller Confidential
Information which Buyer is advised by written reasonable opinion of counsel is
legally required and will exercise Buyer's best efforts to assist Seller in
obtaining a
34
<PAGE>
protective order or other reliable assurance that confidential treatment will be
accorded to the Seller Confidential Information that is disclosed.
(e) Nothing contained in this Section 13.11 will in any way
restrict or impair Buyer's right to use, disclose or otherwise deal with (1)
Seller Confidential Information which at the time of its disclosure is, or which
thereafter becomes through no fault of Buyer or its Representatives, part of the
public domain by publication or otherwise, and (2) Seller Confidential
Information which Buyer can show was in Buyer's possession or the possession of
one or more of its Representatives at the time of disclosure, and was not
acquired, directly or indirectly, under any secrecy obligation to Seller or
another party.
(f) The provisions of this Section 13.11 will lapse and be of
no further force or effect upon Closing.
13.12 Public Announcements. Neither Seller (nor any of its affiliates)
nor Buyer (nor any of its affiliates) will make any public statements, including
without limitation any press releases, with respect to this Agreement and the
transactions contemplated hereby without the prior written consent of the other
party (which consent may not be unreasonably withheld), except as may be
required by law and except that the party required to make such announcement
will, whenever practicable, consult with the other party concerning the timing
and content of such announcement before such announcement is made.
13.13 Severability. If any provision hereof is held by any court of
competent jurisdiction to be illegal, void or unenforceable, such provision will
be of no force and effect, but the illegality or unenforceability will have no
effect upon and will not impair the enforceability of any other provision of
this Agreement.
13.14 Definition of Seller's Knowledge. For purposes of this Agreement,
"KNOWLEDGE" of Seller includes only matters known or which would have been known
after due inquiry by Keith E. Williams.
13.15 Disclosure Schedule; Buyer's Knowledge; Effect on Seller
Representations and Warranties; Effect of Materiality Qualification. Nothing in
the Disclosure Schedule will be deemed adequate to disclose an exception to a
representation or warranty of Seller made herein, unless the Disclosure Schedule
identifies the exception with reasonable particularity and describes the
relevant facts in reasonable detail. Without limiting the generality of the
foregoing, the mere listing (or inclusion of a copy) of a document or other item
will not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the
existence of the document or other item itself). Disclosures in any schedule of
the Disclosure Schedule will constitute disclosure only for purposes of such
schedule's counterpart section herein, and will not constitute disclosure for
purposes of any other section of this Agreement or any exhibit to or other
writing which is designated herein as being part of this Agreement. No
disclosure whatsoever during Buyer's due diligence investigation of Seller will
constitute an enlargement or restriction of the warranties or representations of
Seller hereunder or exceptions thereto beyond those specifically set forth in
this Agreement and the Disclosure Schedule. No
35
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representation or warranty of Seller will be deemed waived in whole or part, and
no Loss resulting from the breach thereof will be reduced, by reason of the fact
that Buyer or its representatives knew or should have known on or before the
Closing Date that such representation or warranty is or might be inaccurate in
any respect. If any representation or warranty of Seller that is qualified by
materiality (including a Material Adverse Effect) is breached after giving
effect to such materiality qualification, then Loss resulting from such breach
includes all Loss resulting from such breach from first dollar as if there were
no such materiality qualification.
13.16 No Third Party Beneficiaries. All Holders are intended
beneficiaries of the provisions of Article VIII, which provisions will inure to
the benefit thereof and be enforceable thereby. Except for the foregoing or as
otherwise expressly permitted by this Agreement, nothing in this Agreement will
confer any rights upon any person or entity which is not a party or permitted
assignee of a party to this Agreement.
13.17 Rule of Construction. The parties hereto acknowledge and agree
that each has negotiated and reviewed the terms of this Agreement, assisted by
such legal and tax counsel as they desired, and has contributed to its
revisions. The parties further agree that the rule of construction that any
ambiguities are resolved against the drafting party will be subordinated to the
principle that the terms and provisions of this Agreement will be construed
fairly as to all parties and not in favor of or against any party.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed on its behalf as of the date first above written.
AETRIUM INCORPORATED
By /s/ Darnell L. Boehm
Its Chief Financial Officer
WEB Technology, Inc.
By /s/ Keith E. Williams
Its President
36
EXHIBIT 5.1
[OPPENHEIMER WOLFF & DONNELLY LLP LETTERHEAD]
April 7, 1998
Board of Directors
Aetrium Incorporated
2350 Helen Street
North St. Paul, Minnesota 55109
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have acted as counsel to Aetrium Incorporated, a Minnesota corporation (the
"Company"), in connection with the registration by the Company of the resale of
900,000 shares of the Company's Common Stock, $.001 par value per share (the
"Shares"), pursuant to the Company's Registration Statement on Form S-3 filed
with the Securities and Exchange Commission on April 7, 1998 (the "Registration
Statement") on behalf of the certain selling shareholders named therein (the
"Selling Shareholders").
In acting as counsel for the Company and arriving at the opinions expressed
below, we have examined and relied upon originals or copies, certified or
otherwise identified to our satisfaction, of such records of the Company,
agreements and other instruments, certificates of officers and representatives
of the Company, certificates of public officials and other documents as we have
deemed necessary or appropriate as a basis for the opinions expressed herein. In
connection with our examination, we have assumed the genuiness of all
signatures, the authenticity of all documents tendered to us as originals, the
legal capacity of all natural persons and the conformity to original documents
of all documents submitted to us as certified or photostatic copies.
Based on the foregoing, and subject to the qualifications and limitations stated
herein, it is our opinion that:
1. The Company had the corporate authority to issue the Shares in the
manner and under the terms set forth in the Registration Statement.
2. The Shares being registered for resale by the Selling Shareholder under
the Registration Statement have been duly authorized and are validly
issued, fully paid and nonassessable.
<PAGE>
Board of Directors
Aetrium Incorporated
April 7, 1998
Page 2
We express no opinion with respect to laws other than those of the State of
Minnesota and the federal law of the United States of America, and we assume no
responsibility as to the applicability thereto, or the effect thereon, of the
laws of any other jurisdiction.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement, to its use as part of the Registration Statement, and to
the use of our name under the caption "Validity of Common Stock" in the
Prospectus constituting a part of the Registration Statement.
We are furnishing this opinion to the Company solely for its benefit in
connection with the Registration Statement as described above. It is not to be
used, circulated, quoted or otherwise referred to for any other purpose. Other
than the Company, no one is entitled to rely on this opinion.
Very truly yours,
/s/ Oppenheimer Wolff & Donnelly LLP
OPPENHEIMER WOLFF & DONNELLY LLP
Plaza VII Suite 3400
45 South Seventh Street
Minneapolis, MN 55402
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
January 30, 1998, which appears on page 17 of the 1997 Annual Report to
Shareholders of Aetrium Incorporated, which is incorporated by reference in
Aetrium Incorporated's Annual Report on Form 10-K for the year ended December
31, 1997. We also consent to the incorporation by reference of our report on the
Financial Statement Schedules, which appears on page 19 of such Annual Report on
Form 10-K. We also consent to the reference to us under the headings "Experts"
in such Prospectus.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Minneapolis, Minnesota
April 3, 1998
