ASSET PURCHASE AGREEMENT
BY
DIGITAL CARD SYSTEMS, INC.
AND
XXXXXX PHOTO PROPERTIES, INC.
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TABLE OF CONTENTS
1. Definitions ............................................................................ 5
2. Basic Transaction ...................................................................... 15
(a) Purchase and Sale of Assets ............................................. 15
(b) Assumption of Liabilities ............................................... 15
(c) Purchase Price .......................................................... 15
(d) Deposit ................................................................. 15
(e) Lease, Office of Xxxxxx Xxxxxx .......................................... 16
(f) Employment Agreement of Xxxx Xxxxxx ..................................... 16
(g) The Closing ............................................................. 16
(h) Deliveries at Closing ................................................... 18
(i) Capital Equipment Closing ............................................... 19
(j) Allocation .............................................................. 19
3. Representations and Warranties of the Seller ........................................... 19
(a) Organization of Seller .................................................. 19
(b) Authorization of Transaction ............................................ 19
(c) Noncontravention ........................................................ 20
(d) Broker's Fees ........................................................... 20
(e) Title to an Possession of Acquired Assets ............................... 20
(f) Liens and Adverse Agreements ............................................ 20
(g) Financial Statements .................................................... 20
(h) Absence of Certain Adverse Events ....................................... 21
(i) Undisclosed Liabilities ................................................. 22
(j) Legal Compliance ........................................................ 22
(k) Tax Matters ............................................................. 22
(l) Intellectual Property ................................................... 23
(m) Tangible Assets ......................................................... 24
(n) Inventory ............................................................... 24
(o) Contracts ............................................................... 25
(p) Insurance ............................................................... 25
(q) Litigation .............................................................. 26
(r) Product Warranty ........................................................ 26
(s) Product Liability ....................................................... 26
(t) Employees and Labor Matters ............................................. 27
(u) Employee Benefits ....................................................... 28
(v) Disclosure .............................................................. 28
(w) Warranties Survive Closing .............................................. 28
(x) Environmental Matters ................................................... 29
(y) Solvency ................................................................ 30
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4. Representations and Warranties of the Buyer ............................................ 31
(a) Organizations of the Buyer .............................................. 31
(b) Authorization of Transactions ........................................... 31
(c) Noncontravention ........................................................ 31
(d) Broker's Fees ........................................................... 31
(e) Capital Resources ....................................................... 32
(f) Warranties Survive Closing .............................................. 32
5. Convenants and Agreements of the Parties ............................................... 32
(a) General ................................................................. 32
(b) Assignment, Benefits, and Performance of Accepted Contracts ............. 32
(c) Payment of Expenses ..................................................... 33
(d) Convenant Not to Compete ................................................ 33
(e) Employee Matters ........................................................ 33
(f) Real Estate Lease ....................................................... 34
(g) Due Diligence ........................................................... 34
(h) Accounts Receivable and Accounts Payable ................................ 34
(i) PRO ..................................................................... 34
(j) Adjustments at Closing .................................................. 35
(k) Best Efforts ............................................................ 35
6. Conditions to Obligation to Close ...................................................... 35
(a) Conditions to Obligation of the Buyer ................................... 35
(b) Conditions to Obligation of the Seller .................................. 36
7. Termination ............................................................................ 36
(a) Termination of Agreement ................................................ 36
(b) Effect of Termination ................................................... 37
8. Indemnification ........................................................................ 37
(a) Indemnification Provisions for Benefit of the Buyer ................... 37
(b) Indemnification Provisions for Benefit of the Seller .................... 38
(c) Matters Involving Third Parties ......................................... 39
(d) Limitation on Liability ................................................. 40
(e) Consequential and Other Damages ......................................... 40
9. Resolution of Disputes, Binding Arbitration ............................................ 40
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10. Miscellaneous ......................................................................... 41
(a) Press Releases and Public Announcements ................................. 41
(b) No Third Party Beneficiaries ............................................ 41
(c) Entire Agreement......................................................... 41
(d) Succession and Assignment ............................................... 41
(e) Counterparts ............................................................ 41
(f) Headings ................................................................ 42
(g) Notices ................................................................. 42
(h) Governing Law ........................................................... 43
(i) Amendments and Waivers .................................................. 43
(j) Severability ............................................................ 43
(k) Construction ............................................................ 43
(l) Incorporation of Exhibits and Schedules ................................. 44
(m) Specific Performance .................................................... 44
Exhibits
Exhibit A Real Estate Lease
Exhibit B Xxxxxx Employment Agreement
Exhibit C Consignment Agreement
Exhibit D Liabilities to be Assumed
Exhibit E Tradenames
Exhibit F Insurance Policies
Exhibit G Product Warranty
Exhibit H Employee Benefits
Exhibit I Allocation
Exhibit J Other Disclosures
Exhibit K Capital Equipment
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT ("Agreement") is made and entered into on
June 5, 2006, by and among:
XXXXXX PHOTO PROPERTIES, INC., an Arizona corporation (the "Seller") and XXXXXX
XXXXXX ("PRINCIPAL STOCKHOLDER"), XXXXXXXX XXXXXX, XXXXXX FAMILY TRUST, XXXX
XXXXXX, AND XXXX XXXXXX (collectively the "Stockholders");
-AND-
DIGITAL CARD SYSTEMS, INC. ("DCS"), a Delaware corporation, or its
nominee (collectively, the "Buyer").
The Seller and the Buyer are referred to collectively herein as the "Parties."
This Agreement contemplates a transaction in which the Buyer will
purchase, in exchange for cash, all of the "Acquired Assets" and assume only
certain "Assumed Liabilities" of the "Seller's Business" (as those capitalized
terms are hereinafter defined).
Now, therefore, in consideration of the promises and the mutual
promises herein made, and in consideration of the representations, warranties,
and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS. In addition to other terms defined herein, as used in this
Agreement the following terms shall have the meanings defined below.
1.1 "Acquired Assets" means all of the tangible and intangible assets
and properties, real, personal and mixed (other than the Excluded Assets),
wherever located, which are owned, leased or otherwise used by the Seller or any
Affiliate of the Seller as at the Closing Date and which are used, in whole or
in part, in connection with the operations of the Seller's Business, including,
without limitation, the following:
(a) all common law rights Seller may have in the trademarks and
trade names Al-Cor/Photomark", "Photomark", "Photomark Camera & Video",
"Colormark" and "Colormark Imaging Lab", "5 Star Imaging", "Photo Concepts",
"Al-Cor NPM", and any other trade name relating to, associated with, or
otherwise used in connection with the operations of the Seller's Business,
including, without limitation, all licenses and sublicenses granted and obtained
with respect thereto, and rights thereunder (including, without limitation, all
rights of assignment); all remedies against infringements thereof, and rights to
protection of interests therein under the laws of all jurisdictions ("Tradename
Rights");
(b) all cameras, photographic and digital development equipment,
photo finishing equipment, computer hardware, software, servers, modems, data
processing equipment, printers, tools, molds, dyes, spare parts, material
handling equipment, supplies, manufactured and purchased parts, furniture,
fixtures, furnishings, office equipment and other items of similar character
used in the Seller's Business, and other related items of personal property;
including computers that are owned or leased by the Seller for use in the
Seller's Business (the "Personal Property");
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(c) all transferable computer programs, software, customer and
vendor lists, including without limitation, those associated with Seller's
Business, billing and materials records and other written and computer data and
information related to the Seller's Business, including, without limitation, the
economic resource and planning systems and computer systems (collectively,
"Business Data");
(d) all inventories of raw materials, work in progress, and finished
goods and packaging materials, including, without limitation, photographic
equipment and supplies, plastic cards, plastic laminate, cameras, printers and
software as at the Closing Date relating to the Seller's Business, including
inventories located in both Phoenix and Las Vegas, as well as inventory in
transit (the "Inventory");
(e) all transferable leases and subleases to the Personal Property,
and rights thereunder, relating to the Seller's Business (the "Leases");
(f) all transferable rights and benefits including, without
limitation, all rights to receive payment for products sold or services rendered
following the Closing Date and to assert Claims (and to take other rightful
actions in respect of breaches, defaults and other violations) under all
agreements, contracts, contract rights, purchase orders, sales orders, sales
agreements, supply agreements, licenses, dealer agreements, distributor
agreements, and other agreements (whether written or oral) to which the Seller
or any of its Affiliates is a party and which relate to the Seller's Business
and commerce stream (collectively, the "Contracts"); it being agreed that: (i)
all Contracts that have been entered into in the Ordinary Course of the Seller's
Business and (except as otherwise agreed in writing by Buyer) have been entered
into upon arm's length terms and conditions with Persons who are not Affiliates
of the Seller shall be deemed to be an "Accepted Contract" (as defined in ss.1.2
below) and included in the Acquired Assets; and (ii) unless otherwise agreed by
the Buyer, it shall not be obligated to assume any Contract that is not an
Accepted Contract (a "Rejected Contract").
(g) all supplies, packaging materials, marketing and sales
literature, advertising materials, catalogues, consumable materials and other
items of similar character used in the operation of the Seller's Business
(collectively, "Consumables");
(h) to the extent such items are not related to the Excluded Assets
or Excluded Liabilities, all claims, deposits, prepayments, refunds, causes of
action, demands, rights of recovery, rights of set off, and rights of recoupment
relating to the Seller's Business (collectively, "Claims"), including any such
Claim relating to Tradename Rights infringement, rights under Accepted
Contracts, Claims against vendors or suppliers, and other rights or Claims in
respect of the Acquired Assets of any nature whatsoever, whether being pursued
by or otherwise available to the Seller with respect to the Seller's Business;
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(i) to the extent their transfer is permitted by Law (as that term
is defined in ss.3(j) below) and by the applicable "Governmental Permit" (as
defined below), all franchises, approvals, permits, licenses, applications,
orders, registrations, certificates, variances, product registrations and
similar rights obtained from governments and governmental agencies which are
used in the operation of the Seller's Business and which are transferable
(collectively, the "Governmental Permits"), and to the extent permitted by Law
and the applicable Governmental Permit, the benefits of such Governmental
Permits;
(j) all books and records (excluding corporate books and records),
manuals, ledgers, files, documents, correspondence, lists, drawings, and
specifications, creative materials, advertising, marketing and promotional
materials, studies, reports, and other printed or written materials of the
Seller's Business, including without limitation, all vendor lists, customer
lists and contact details, sales, manufacturing and customer records, purchase
records, price lists, correspondence, quality control records and all research
and development files (the "Records");
(k) to the extent such items are not related to the Excluded Assets
or Excluded Liabilities, all guarantees, warranties, indemnities and similar
rights in favor of the Seller with respect to any Acquired Asset, and all
claims, deposits, unemployment compensation account balances of the Seller
related to the Seller's Business to the extent transferable; provided, that the
Buyer shall be responsible for the payment of any deductibles required to be
paid following the Closing Date in connection with the exercise of any such
rights;
(l) to the extent their transfer is permitted by Law, all of the
Seller's rights in, to and under any Accepted Contract with any consultants,
agents, representatives, customers, suppliers, vendors or otherwise, of the
Seller relating solely to the Seller's Business regarding non-competition,
non-solicitation and/or confidentiality of trade secrets, proprietary or other
information;
(m) any and all other rights and assets owned by the Seller or used
by the Seller in the operation of the Seller's Business, including all of the
rights of the Seller to conduct the Seller's Business as it exists at the
Closing, including the right to pursue orders resulting from quotations to
customers outstanding at the Closing, but excluding the Excluded Assets;
(n) the 51% equity interest that Seller owns in Al-Cor NPM.
(o) the goodwill of the Seller's Business as a going concern as of
the Closing Date ("Goodwill").
1.2 "Accepted Contracts" means any and all of the Contracts relating to
the Seller's Business as at the Closing Date that has been entered into by the
Seller in the Ordinary Course of the Seller's Business and (unless otherwise
agreed in writing by Buyer) upon arm's length terms and conditions with Persons
who are not Affiliates of the Seller.
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1.3 "Acquisition Documents" means the collective reference to this
Agreement as duly executed, the Transfer Instruments and the Exhibits annexed
hereto, all as approved by the Parties.
1.4 "Adverse Consequences" has the meaning as is defined in ss.8(a) of
this Agreement.
1.5 "Affiliate" means: (a) with respect to the Seller, any Person
(including, without limitation, any creditor, shareholder, employee, agent,
consultant, manager or director), directly or indirectly, controlling,
controlled by or under common control with the Seller or any of its
"Affiliates;" it being understood and agreed that each of the Stockholders and
Al-Cor/Photomark, Photomark Camera & Video and Colormark Imaging Lab, 5 Star
Imaging, Photo Concepts, and Al-Cor NPM, whether corporations, partnerships,
sole proprietorships or divisions of the Seller, is hereby deemed to be an
Affiliate of the Seller; and (b) with respect to the Buyer or any other Person
(including, without limitation, any creditor, shareholder, employee, agent,
consultant, manager or director), directly or indirectly, controlling,
controlled by or under common control with the Buyer or any of its "Affiliates".
1.6 "Assumed Liabilities" shall mean only the liabilities and
obligations of the Buyer arising from and after the Closing Date under (a)
Assumed Contracts, (b) in respect of the Real Estate Lease, and (c) in
connection with the conduct of the Seller's Business for all periods from and
after the Closing Date; it being understood and agreed that the terms "Assumed
Liabilities" shall not mean or include any liabilities or obligations arising
out of any events, actions or inaction that occurred at any time prior to the
Closing Date.
1.7 "Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to achieve that result as
expeditiously as possible, provided, however, that a Person required to use Best
Efforts under this Agreement will not be thereby required to take actions that
would result in a material adverse change in the benefits to such Person of this
Agreement and the contemplated Transactions or to dispose of or make any change
to its business, expend any material funds or incur any other material burden.
1.8 "Business" or "Seller's Business" means the individual or
collective reference to the distribution of identification products, the retail
and wholesale distribution of both conventional and digital photographic
equipment and the development and processing of both conventional and digital
film.
1.9 "Buyer" has the meaning set forth in the preface above.
1.10 "Cash" means cash and cash equivalents (including marketable
securities and short term investments).
1.11 "Closing" has the meaning set forth in ss.2(g) below.
1.12 "Closing Date" has the meaning set forth in ss.2(g) below.
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1.13 "Exhibit" has the meaning set forth in ss.3 below.
1.14 "Employee Benefit Plan" means any (a) deferred compensation or
retirement plan or arrangement, (b) defined contribution retirement plan or
arrangement which is an Employee Pension Benefit Plan, (c) qualified defined
benefit retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multiemployer Plan), or (d) Employee Welfare Benefit Plan or
material fringe benefit or other retirement, bonus, or incentive plan or program
which is listed or otherwise described in Exhibit H and, in each case, only with
respect to employees of the Seller's Business.
1.15 "Employee Pension Benefit Plan" means any employee pension or
retirement plan currently existing for employees of the Seller or the Seller's
Business under applicable Laws which is listed or otherwise described in Exhibit
H.
1.16 "Employee Welfare Benefit Plan" means any medical, dental or
related health plan currently existing for employees of the Seller or the
Seller's Business under applicable Laws which is listed or otherwise described
in Exhibit H.
1.17 "Environmental, Health and Safety Laws" shall mean all statutes,
regulations, ordinances and other provisions having the force or effect of law,
all judicial and administrative orders and determinations, all contractual
obligations, including responsible parties pay private parties, or groups of
them, for damages done to their health or the environment or permitting
self-appointed representatives of the public interest to recover for injuries
done to public assets, and all common law concerning public health and safety,
worker health and safety, and pollution or protection of the environment,
including, without limitation, all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any chemical, compound, product, solid, gas,
liquid, waste, byproduct, material, pollutant or contaminant which is hazardous,
toxic or otherwise harmful to health, safety, natural resources, wildlife or the
environment, including, without limitation, asbestos (whether friable or not),
PCB's, radon and urea, formaldehyde foam, petroleum and petroleum products,
radiation, or other hazardous waste, which is included or defined under or
regulated by any environmental laws, each as amended and as now or hereafter in
effect (collectively, "Hazardous Substances").
1.18 "Excluded Assets" shall mean and be limited to:
(a) all Cash and cash equivalents of Seller or the Seller's
Business;
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(b) all real property located in Phoenix, Arizona or elsewhere that
is owned or leased and used in the operations of the Seller's Business,
including all leasehold interests and subleasehold interests therein,
improvements, fixtures, and fittings thereon, and easements, rights-of-way, and
other appurtenants thereto, such as appurtenant rights in and to public streets
(individually or collectively, the "Real Estate"), provided, however, that from
and after the Closing Date, the Buyer shall be entitled to lease the Real Estate
pursuant to the Real Estate Lease;
(c) all Accounts Receivable;
(d) all rights under any Contract which becomes a Rejected Contract;
(e) all investments by the Seller in any of their Affiliates, other
than the Seller's Business; and
(f) the corporate charter, qualifications to conduct business as a
foreign corporation, arrangements with registered agents relating to foreign
qualifications, taxpayer and other identification numbers, seals, minute books,
stock transfer books, blank stock certificates, and other documents relating to
the organization, maintenance, and existence of the Seller or any Subsidiary of
the Seller as a corporation.
(g) the camera museum of Xxxxxx Xxxxxx ("Camera Museum")
(h) the historical negatives from the photography business of Xxxxxx
Xxxxxx stored in the Mosler safe ("Historic Negatives")
1.19 "Excluded Liabilities" means all Liabilities and obligations of
every kind and description of the Seller or any Affiliate or Subsidiary of the
Seller (including the Seller's Business) which are not Assumed Liabilities.
Without limiting the generality of the foregoing, such Excluded Liabilities
shall include:
(a) any and all accounts payable, or other obligations of the Seller
or the Seller's Business to suppliers, vendors or other Persons that have
supplied goods, products or services to the Seller's Business for all periods
through and including the Closing or otherwise under any Contracts that are not
Accepted Contracts;
(b) any and all Liabilities under any Employee Welfare Benefit Plan,
or any and all accrued vacation pay, sick leave or related employee benefit
Liabilities owed to any employees of the Seller or the Seller's Business;
(c) any and all Liabilities under any Employee Benefit Plan or
Employee Pension Benefit Plan, or any and all accrued profit sharing, pension or
related Liabilities payable to any employees of the Seller or the Seller's
Business;
(d) any and all payroll, employment, occupation, withholding, social
security (or similar) unemployment Taxes relating to employees of the Seller's
Business as at the Closing;
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(e) any Employee Benefit Plan, Employee Pension Benefit Plan or
Employee Welfare Benefit Plan of the Seller, or any and all severance pay or
related severance Liability payable to employees, any accrued profit sharing,
bonus or severance obligations, or other Liabilities or expenses which are or
may be owed to any employees of the Seller or the Seller's Business as at the
Closing Date, whether or not such employees become Hired Employees;
(f) any intercompany accounts or notes payable, accrued expenses or
other Liabilities or obligations to Seller or any of Seller' Subsidiaries or
Affiliates;
(g) any Liabilities or obligations of the Seller representing
indebtedness for money borrowed or as the deferred purchase price for any assets
or properties (including capitalized lease obligations), whether payable under
any notes or indentures or otherwise (collectively, "Indebtedness"), with the
exception that the Buyer shall accept the liabilities related to the company
machinery and equipment as set forth in Exhibit D;.
(h) any and all accrued expenses or other accruals which would
constitute a Liability of the Seller or the Seller's Business as at the Closing
Date;
(i) any Liability or obligation under any Contract, lease or other
agreement that is a Rejected Contract or not otherwise included in the Acquired
Assets;
(j) any Liability for Taxes, or any Liability for the unpaid Taxes
of the Seller, their Subsidiaries and Affiliates and the Seller's Business as at
the Closing Date under any Laws or any similar provision, whether directly, as a
transferee or successor, by contract, or otherwise;
(k) any Liability (whether as a transferee or successor, by contract
or otherwise) arising out of events, acts or omissions relating to the Seller's
Business, the Seller or any of their Affiliates which occurred on or before the
Closing Date, for (i) infringement of any patent, patent application or other
Intellectual Property, (ii) violation of any Employee Benefit Plan, Employee
Pension Benefit Plan or Employee Welfare Plan in existence as at the Closing
Date, or (iii) violation of any Laws (as hereinafter defined) including, without
limitation, any Environmental, Health and Safety Laws (irrespective of whether
or not such Liability or Claims are disclosed on the schedules of this
Agreement);
(l) any Liability or obligation to indemnify any Person (including
the Seller' Inventoryholders) by reason of the fact that such Person was a
director, officer, employee, or agent of the Seller and its Subsidiaries or was
serving at the request of any such entity as a partner, trustee, director,
officer, employee, or agent of another entity (whether such indemnification is
for judgments, damages, penalties, fines, costs, amounts paid in settlement,
losses, expenses, or otherwise and whether such indemnification is pursuant to
any statute, charter document, bylaw, agreement, or otherwise);
(m) any Liability or obligation of the Seller or their Affiliates to
pay any creditors, avoidance claims or other amounts, costs and expenses
required to be paid in connection with the liquidation, dissolution or other
termination of the business operations of the Seller, or any of them following
the Closing Date (collectively, "Liquidation Obligations");
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(n) any Liability or obligation of the Seller (i) in respect of any
or all of the Excluded Liabilities, (ii) under this Agreement or (iii) under any
Transfer Instrument, Assumption Instrument or other certificate or agreement
with Buyer or any third Party entered into on or after the date of this
Agreement which are not one of the Assumed Liabilities;
(o) any Liability arising out of any Proceeding commenced after the
Closing Date and arising out of or relating to any occurrence or event happening
prior to the Closing Date;
1.20 "Financial Statement" has the meaning set forth in ss.3(g) below.
1.21 "GAAP" means generally accepted accounting principles for
financial reporting in the United States, applied on a basis consistent with the
basis on which the financial statements referred to in ss.3(g) herein.
1.22 "Governmental Body" any:
(a) nation, state, county, city, town, borough, village, district or
other jurisdiction;
(b) federal, state, local, municipal, foreign or other government;
(c) governmental or quasi-governmental authority of any nature
(including any agency, branch, department, board, commission, court, tribunal or
other entity exercising governmental or quasi-governmental powers);
(d) multinational organization or body;
(e) body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial, legislative, police, regulatory or taxing
authority or power; or
(f) official of any of the foregoing
1.23 "Knowledge" means an individual will be deemed to have Knowledge
of a particular fact or other matter if: (a) that individual is actually aware
of that fact or matter; or (b) a prudent individual could be expected to
discover or otherwise become aware of that fact or matter in the course of
conducting a reasonably comprehensive investigation regarding the accuracy of
any representation or warranty contained in this Agreement.
A Person (other than an individual) will be deemed to have Knowledge of
a particular fact or other matter if any individual who is serving, or who has
at any time served, as a director, officer, partner, executor or trustee of that
Person (or in any similar capacity) has, or at any time had, Knowledge of that
fact or other matter (as set forth in (a) and (b) above), and any such
individual (and any individual party to this Agreement) will be deemed to have
conducted a reasonably comprehensive investigation regarding the accuracy of the
representations and warranties made herein by that Person or individual.
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1.24 "Liability" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due), including any liability for Taxes.
1.25 "Lien" means any mortgage, community or other marital property
interest, condition, right of way, easement, encroachment, servitude, right of
first option, right of first refusal or similar restriction, including any
restriction on use, voting (in the case of any security or equity interest),
transfer, receipt of income or exercise of any other attribute of ownership,
equitable interest, option, deed, pledge, lien, security interest, encumbrance,
charge, or other claim or interest of any kind or nature, whether known or
unknown.
1.26 "Material Adverse Effect" means any event or condition which is
likely to have a material adverse effect on the Seller or the Seller's Business,
financial condition or results of operations of the Seller and/or the Seller's
Business, when taken as a consolidated or combined whole.
1.27 "Most Recent Balance Sheet" means the balance sheet dated as at
October 31, 2005, contained within the Most Recent Financial Statements.
1.28 "Most Recent Financial Statements" has the meaning set forth in
ss.3(g) below.
1.29 "Ordinary Course of Business" an action taken by a Person will be
deemed to have been taken in the Ordinary Course of Business only if that
action:
(a) is consistent in nature, scope and magnitude with the past
practices of such Person and is taken in the ordinary course of the normal,
day-to-day operations of such Person;
(b) does not require authorization by the board of directors or
shareholders of such Person (or by any Person or group of Persons exercising
similar authority) and does not require any other separate or special
authorization of any nature; and
(c) is similar in nature, scope and magnitude to actions customarily
taken, without any separate or special authorization, in the ordinary course of
the normal, day-to-day operations of other Persons that are in the same line of
business as such Person.
1.30 "Party" has the meaning set forth in the preface above.
1.31 "Permitted Liens" means and is limited to: (i) Liens arising by
operation of law, (ii) Liens for current Taxes not yet due, (iii) items
constituting part of the Acquired Assets which are leased by the Seller, or the
Seller's Business or any Affiliate of the Seller, or (iv) materialman's Liens,
mechanics Liens or statutory Liens that are not, individually or in the
aggregate, material to the Acquired Assets or the Seller's Business.
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1.32 "Person" means, without limitation, an individual, a partnership,
a corporation, an association, a joint stock company, a trust, a joint venture,
an unincorporated organization, or a governmental entity (or any department,
agency, or political subdivision thereof).
1.33 "Proceeding" means any action, arbitration, audit, hearing,
investigation, litigaton or suit (whether civil, criminal, administrative,
judicial or investigative, whether formal or informal, whether public or
private) commenced, brought, conducted or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
1.34 "Purchase Price" has the meaning set forth in ss.2(c) below.
1.35 "Real Estate" shall mean the real estate and improvements located
at and adjacent to 0000 Xxxx XxXxxxxx Xxxx, Xxxxxxx, Xxxxxxx 00000, as further
defined in the real estate lease.
1.36 "Real Estate Lease" shall mean the lease agreement between the
Buyer and the Principal Stockholder or his Affiliate to be executed on the
Closing Date, pursuant to which the Buyer shall lease the Real Estate for a five
year period from the Closing Date (subject to one additional five (5) year
renewal term at the option of the Buyer), all in accordance with the terms of
the lease agreement in the form of EXHIBIT A annexed hereto and made a part
hereof.
1.37 "ss." or "Section" means any of the sections referred to in this
Agreement or in the Exhibits.
1.38 "Seller" has the meaning set forth in the preface above.
1.39 "Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns a majority of the common stock
or has the power to vote or direct the voting of sufficient securities to elect
a majority of the directors.
1.40 "Tax" means any federal, state, local, or foreign income, value
added tax, capital gains, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits, environmental, customs
duties, capital Inventory, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not, including any liability of another
Party for any of the foregoing, payable pursuant to a tax-sharing or tax
indemnification agreement.
1.41 "Transfer Instruments" means those documents and instruments
referred to in Section 2(f) below, including bills of sale, quit claim deeds and
other instruments of transfer, to be executed and delivered by the Parties
following the Closing Date (in form and content satisfactory to counsel to each
of the Parties) pursuant to which:
14
(a) the Acquired Assets shall be transferred, conveyed and/or
assigned to the Buyer, as necessary to enable the Buyer to own and hold good and
marketable title to the Assets, free and clear of all Liens, other than
Permitted Liens; and
(b) the Buyer shall assume, by such instruments of assumption, all
of the Assumed Liabilities.
1.42 "WARN Act" as defined in Section 3(u) herein.
2. BASIC TRANSACTION.
(a) Purchase and Sale of Acquired Assets. On the terms and subject to
the conditions of this Agreement, at the Closing, but effective as of the
Closing Date, the Buyer agrees to purchase from the Seller, and the Seller
hereby jointly and severally agrees to sell, transfer, convey, and deliver to
the Buyer, free and clear of any Liens, other than Permitted Liens, all of the
right, title, and interest of the Seller in and to all of the Acquired Assets,
as the same are constituted on the Closing Date, in exchange for the
consideration specified below in this ss.2. The Buyer shall not purchase or
acquire at the Closing or otherwise any of the Excluded Assets.
(b) Assumption of Liabilities. On the Closing Date, Buyer shall assume
and agree to discharge only those specific Assumed Liabilities of Seller that
are described in Section 1.6 above.
(c) Purchase Price. Subject to all of the terms and conditions of this
Agreement, at Closing, the Buyer shall pay to the Seller, a purchase price of
Five Hundred Ninety One Thousand Dollars ($591,000) for the capital equipment
and other business assets (the "Equipment Payment"), and a payment equal to the
value of the inventory (the "Inventory Payment"), (payments collectively, the
"Purchase Price"). The Purchase Price for the Acquired Assets shall be payable
on, or before, the Closing Date in Cash by wire transfer of immediately
available funds. The Inventory Payment shall be equal to the book value of the
Seller's inventory acquired by the Purchaser as determined in accordance with an
audit and counting of the physical inventory, as of the close of business on the
Closing Date. Values presented in the inventory listing of January 31, 2006 were
shown to be approximately $1,000,000. Parties agree that inventory in excess of
one year shall remain the property of the Seller, but will be marketed by Buyer
on a consignment arrangement as set forth in Exhibit C. Inventory to be acquired
shall include certain demonstration equipment over one year old that shall
become the property of the Buyer. Parties agree that certain Inventory,
including that which is in transit, or that which is not otherwise able to be
counted as of the Closing Date, shall be later counted and shall be paid for by
the Buyer in a timely manner following Closing.
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(d) Deposit. Buyer agrees to deliver a Fifty Thousand Dollar ($50,000)
deposit with the execution of this Agreement. This deposit shall be
non-refundable so long as the Seller has satisfied the conditions of this
paragraph. This deposit shall be applied to the Purchase Price at Closing, or to
the Equipment Payment should that occur prior to Closing. If the Closing does
not occur by the Outside Closing Date, and the Seller has acted in good faith
relative to closing matters, including conducting and completing an inventory
audit witnessed by the Buyer during the weekend of June 3 and June 4, 2006, the
Seller shall be entitled to retain the deposit. Should the inventory audit, by
the Seller's decision, be delayed beyond the Outside Closing Date, then the
Buyer shall have three days following the completion of the inventory audit to
close the Agreement, and apply the deposit to the Purchase Price. Should the
Seller elect not to complete the inventory audit, then the deposit shall be
refundable, unless previously applied to the Equipment Payment.
(e) Lease, Office of Xxxxxx Xxxxxx, Special Provisions. Seller agrees
to make continued use of its real estate facility available for the Buyer, as
set forth in Exhibit A.
Buyer also agrees to maintain an office in the facility during the
initial term of the Lease for Xxxxxx Xxxxxx, with the agreement that he shall be
invited to remain an adviser to the Buyer, on such terms, conditions, and
schedule as may be acceptable to Xx. Xxxxxx. Parties agree that initially there
shall be no specific performance conditions associated with this office, and
there shall be no compensation to Xx. Xxxxxx apart from the lease payments, and
the assumption of ordinary office expenses by the Buyer, unless the Parties,
separate from this Agreement, negotiate otherwise.
The Parties also agree that the Xx. Xxxxxx shall be entitled to house
his Camera Museum and the Historic Negatives at their present locations, at no
cost, during the initial term of the Lease.
The Parties also agree that Xxxxxx Southwest shall be entitled to
continue to store its negatives in the Mosler safe during the term of the Lease,
and shall be entitled to access the Mosler safe during normal business hours.
The execution of the Lease shall be a condition precedent to the
closing of the Asset Purchase Agreement.
(f) Employment Agreement of Xxxx Xxxxxx. Buyer shall enter into an
employment agreement with Xxxx Xxxxxx as set forth in Exhibit B. The execution
of Xxxxxx'x Employment Agreement shall be a condition precedent to the closing
of the Asset Purchase Agreement.
(g) Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place commencing on June 5, 2006, or as
soon thereafter as is practicable, following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions the
respective Parties shall take at the Closing itself) or such other date as the
Parties may mutually determine (the "Closing Date"). In any event, Closing shall
occur on the morning after the counting of the inventory, and the Purchase Price
to be distributed to the Seller on that date.
At Closing, the Lease and Xxxxxx'x Employment Agreements shall be
executed.
Closing shall be subject to the provisions of the Capital Equipment
Closing referenced below in this ss.2.
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(i) The Parties hereto do agree that time is of the essence
and, unless extended by mutual written agreement of Seller and Buyer, the
closing deliveries set forth in Section 2(h) below, the payment of the Purchase
Price in accordance with Section 2(c) above, and the sale of the Acquired Assets
to Buyer and other transactions contemplated hereby, shall all take place no
later that the close of business (Phoenix, Arizona, P.S.T.) on June 5, 2006 (the
"Outside Closing Date"); failing which either (i) the Seller may terminate this
Agreement without any further liability or obligation to the Buyer, or (ii)
Buyer may terminate this Agreement without any further liability or obligation
to the Seller, except that the Seller shall be entitled to retain the $50,000
deposit, subject to the provisions of Section 2(d).
(ii) To facilitate the Closing, the Parties agree that this
executed Agreement may be delivered to each of the Parties by facsimile
transmission, and that the ribbon originals of this Agreement, together with the
other Transfer Instruments contemplated hereby, shall be delivered promptly
after the Closing by Fedex or other overnight or express mail deliveries.
(iii) All documents to be delivered at Closing and thereafter
to and on behalf of the Buyer shall be delivered by the Seller to:
DCS Card Systems, Inc.:
0 Xxxxxxxxxx Xxxx Xxxx
Xxxxx, Xxxxxxxxxxxxx 00000
Attn; Xxxxxxx Benz, CEO
Tel: (000) 000-0000
Fax: (000) 000-0000
With respect to communications to DCS a copy to:
Xxxxxxx X. XxXxxx, Esq.
Xxxxx & Xxx Xxxxxx LLP
0 Xxxx Xxxxxx, 00xx Xxx.
Xxx Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
(iv) All documents to be delivered at Closing and thereafter
to and on behalf of the Seller shall be delivered by the Buyer to:
Xxxxx Xxxxxx, P.C.
0000 Xxxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
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(h) Deliveries at the Closing:
(i) the Buyer will deliver in cash, by wire transfer of
immediately available funds, to an account designated by the Seller the full
Purchase Price;
(ii) the Seller shall deliver to the Buyer, where practical,
irrevocable and unconditional release letters from any Affiliate or other third
party releasing all Liens or other Claims held by such Persons on the Acquired
Assets and the Seller's Business, with the exception being the liens associated
with the machinery and equipment listed in Exhibit D; and where it is not
practical, such releases shall be delivered immediately following Closing;
(iii) the Seller shall deliver to the Buyer the various
certificates, instruments, and documents referred to in ss.6(a) below;
(iv) the Seller will execute, acknowledge (if appropriate),
and deliver to the Buyer all (x) bills of sale, quit claim deeds, assignments,
and other instruments of transfer (including Tradename Rights transfer
documents) in such form as shall be reasonably satisfactory to the Parties and
their respective legal counsel, and (y) such other instruments of sale,
transfer, conveyance, and assignment as the Buyer and its counsel reasonably may
request (collectively, the "Transfer Instruments");
(v) the Buyer shall execute, acknowledge (if appropriate), and
deliver to the Seller (x) an assumption agreement in such form as shall be
reasonably satisfactory to the Parties and their respective legal counsel, and
(y) such other instruments of assumption as the Seller and its counsel
reasonably may request (collectively, the "Assumption Instruments"); and
The Seller and the Stockholders do hereby jointly and severally unconditionally
covenant and agree that the Seller's Business and all Acquired Assets shall be
purchased and owned solely by the Buyer as of the Closing Date. In such
connection, following the Closing Date, the Seller and the Stockholders do
hereby agree that they shall:
(i) fully support all of Buyer's efforts to operate the
Seller's Business from and after the Closing, including without limitation,
providing Buyer's representatives with full and complete access to all Business
Data, Personal Property and other Acquired Assets, full access to all employees
of the Seller who work in the Seller's Business immediately after Closing, and
full access to all order taking, production, shipping, billing and collection
systems relating to the Seller's Business; and
(ii) continue to deliver to the Buyer any and all additional
Transfer Instruments as the Buyer or its legal counsel may require in order to
vest in the Buyer good and marketable title in and to all of the Acquired Assets
and the Seller's Business.
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(i) Capital Equipment Closing The Parties agree that the Seller shall
have the right to close the sale of the capital equipment ("Capital Equipment
Closing") prior to Closing, on May 22, 2006, or some other date prior to
Closing, acceptable to the Parties. Should the Seller elect to go forward with
the Capital Equipment Closing, the Deposit will be applied to the Equipment
Payment rather than to the Purchase Price at Closing, which shall result in a
payment of Five Hundred Forty One Thousand Dollars ($541,000) at the Capital
Equipment Closing. Following the Equipment Closing, Buyer shall hold all right,
title, and interest to the capital equipment shown as Exhibit K. Seller shall
continue to operate the business and shall have the right to operate the capital
equipment until Closing, at which time the operation of the business, and all
the Acquired Assets, will be transferred to the Buyer.
Should the Seller elect to go forward with the Capital Equipment Closing, then
the only payment due at Closing shall be the Inventory Payment.
(j) Allocation. The Parties shall reasonably cooperate to allocate the
Purchase Price (and all other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes). After the
Closing, the Parties shall make consistent use of the allocation, fair market
value and useful lives for all Tax purposes and in all filings, declarations and
reports with the IRS in respect thereof, including the reports required to be
filed under Section 1060 of the Code. Buyer and Seller shall cooperate in
preparing IRS Form 8594 within forty-five (45) days after the Closing Date. In
any Proceeding related to the determination of any Tax, neither Buyer nor Seller
shall contend or represent that such allocation is not a correct allocation.
Unless reasonably modified by consent of both Parties, the Parties agree that
the allocation shall be as shown in Exhibit I.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND STOCKHOLDERS.
The Seller and the Stockholders jointly and severally represent and
warrant to the Buyer that the statements contained in this ss.3 are correct and
complete as of the date of this Agreement, except as set forth in the exhibits
accompanying this Agreement and initialed by the Parties (the "Exhibits").
(a) Organization. The Seller is a corporation organized under the laws
of Arizona. Excepting Al-Cor NPM, the Seller does not have any Subsidiaries or
Affiliates which own or use any Acquired Assets or operate any portion of the
Seller's Business.
(b) Authorization of Transaction. The Seller has full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the board of directors and the stockholders of the
Seller have duly authorized the execution and delivery of this Agreement, and
the performance of this Agreement by the Seller. This Agreement constitutes the
valid and legally binding obligation of the Seller, enforceable in accordance
with its terms and conditions.
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(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the Transfer Instruments and the Assumption Instruments referred to
in ss.2 above), will (i) violate in any respect any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which the Seller
is subject or any provision of the charter or bylaws of the Seller, or (ii)
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel any agreement, contract, lease, license, instrument, or other
arrangement to which the Seller is a party or by which it is bound or to which
any of the Acquired Assets is subject (or result in the imposition of any Lien
other than Permitted Liens upon any of its assets). The Seller does not need to
give any notice to, make any filing with, or obtain any authorization, consent,
or approval of any government or governmental agency in order for the Seller to
consummate the transactions contemplated by this Agreement (including the
Transfer Instruments and Assumption Instruments referred to in ss.2 above).
(d) Brokers' Fees. Neither the Seller nor the Stockholders have any
Liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for which
the Buyer could become liable or obligated.
(e) Title to and Possession of Acquired Assets. The Seller has good and
marketable title to, or a valid leasehold interest in, all of the Acquired
Assets, wherever located, free and clear of all Liens, except for Permitted
Liens and Inventory (if any) sold in the Ordinary Course of the Seller's
Business between the date of this Agreement and the Closing. Only the Seller and
no other Affiliate of Seller or the Stockholders is engaged in the operation of
the Seller's Business. All of the Acquired Assets are owned or leased by, and
are in the physical possession of, only the Seller, and no other Person,
including any other Subsidiary or Affiliate of the Seller.
(f) Liens and Adverse Agreements. There are (i) no outstanding Liens on
any of the Acquired Assets (other than Permitted Liens), and (ii) no outstanding
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments, including proxies,
voting trusts, voting agreements or stockholders agreements, that could
adversely affect the Seller's ability to sell the Acquired Assets to the Buyer
or otherwise consummate the transactions contemplated by this Agreement.
(g) Financial Statements. Prior to the Closing Date, the Seller shall
have delivered the audited balance sheets and statements of income (loss) of the
Seller for the fiscal years ended October 31, 2005, October 31, 2004 (the
"Fiscal Year End Financial Statements" or "Audited Financial Statements"),
audited in compliance with GAAP. Parties agree that Buyer shall be responsible
for the costs of such audits, and shall hold all right, title, and interest to
all workproduct of the auditors generated in connection therewith. Such Fiscal
Year Financial Statements shall present fairly in all material respects the
financial condition of the Seller's Business as of such dates and the results of
operations of the Seller's Business for such periods, shall be correct and
complete in all material respects, and are consistent in all material respects
with the books and records of the Seller.
20
(h) Absence of Certain Adverse Events . Since October 31, 2005, the
Seller has conducted the Seller's Business only in the Ordinary Course of
Business and there has not been any:
(i) acceleration, termination, modification, or cancellation
of any Accepted Contract involving more than $50,000 (individually or
in the aggregate) to which the Seller or the Seller's Business is a
party or by which any of them is bound;
(ii) sale, lease, transfer or assignment, or agreement to
sell, lease, transfer or assign, any of its or their assets or
properties, tangible or intangible, that is material for the operations
of the Seller's Business, other than for sales of Inventory for fair
consideration in the Ordinary Course of the Seller's Business and such
other immaterial assets having a value not in excess of $25,000,
individually or in the aggregate;
(iii) delay or postponement in the payment of any accounts
payable or accrued expense outside of the Ordinary Course of the
Seller's Business;
(iv) indication by any customer or supplier to discontinue or
change the terms of its relationship with the Seller, apart from Seller
no longer being a distributor for LEAF Products;
(v) execution of (A) any License Agreement or sublicense of
any rights under or with respect to any Tradename Rights, (B) any
settlement regarding the breach or infringement of any Tradename Rights
or similar rights affecting the Seller's Business, or (C) modification,
or agreement to modify, any existing rights with respect thereto;
(vi) damage to, or destruction, or loss (whether or not
covered by insurance) of any of the Acquired Assets;
(vii) new written employment contract or collective bargaining
agreement entered into with or covering employees of the Seller's
Business, nor has any such agreement been modified, in any respect;
(viii) change in the basis for the prices charged for services
or products of Seller, and Seller has not changed their credit and
collection policies;
(ix) change in its suppliers, vendors, distributors or
customers who individually or in the aggregate represented more than
one (1%) percent of the consolidated revenues of the Seller's Business
for the fiscal year ended October 31, 2005 nor have notified the
Stockholders, the Seller or the Seller's Business been notified by any
supplier, vendor, distributor, or customer of an intent to reduce their
level of business with, or to discontinue purchasing products or
services from, the Seller's Business following the Closing Date;
21
(x) material change in the accounting methods used by Seller
that is not otherwise disclosed in Seller's financial statements;
(xi) Lien (other than a Permitted Lien) upon any of their
assets, tangible or intangible;
(xii) amendment to the Seller's organizational documents; and
(xiii) neither the Seller nor the Seller's Business has
adopted, amended or modified in any respect, or terminated any bonus,
profit-sharing, incentive, severance, compensation, Inventory option,
retirement, deferred compensation, collective bargaining agreement, or
other plan, contract, or commitment for the benefit of any of the
officers or employees of the Seller's Business (or taken any such
action with respect to any other Employee Benefit Plan covering
employees of the Seller's Business).
(i) Undisclosed Liabilities. Neither the Seller nor the Seller's
Business has any Liability, and to their Knowledge there is no basis for any
present or future action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand against any of them giving rise to any Liability,
other than those disclosed in the Fiscal Year End Statements or incurred in the
Ordinary Course of Business since the date of the most recent of such financial
statements.
(j) Legal Compliance. The operation of the Seller's Business and the
sale and performance of all services by the Seller's Business are in compliance
with all applicable laws, including statutes, rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder of all
Governmental Bodies (collectively "Laws"). No Proceeding has been filed or
commenced against the Seller or the Seller's Business alleging any failure so to
comply, and neither the Seller nor the Seller's Business has received any
written notice from any Governmental, Body that any investigation or review is
pending nor, to the Knowledge of Seller, is any proceeding threatened by any
such Governmental Body (i) with respect to any alleged violation by the Seller
or the Seller's Business or any of their representatives of any Laws which
relate to the Seller's Business or the Acquired Assets, or (ii) with respect to
any alleged failure to have all licenses, permits, registrations and
authorizations required by Law in connection with the operation of the Seller's
Business.
(k) Tax Matters.
(i) all Taxes and withholding amounts due and payable prior to
the Closing relating to the Seller's Business and the Acquired Assets have or
will have been paid in full prior to the Closing;
(ii) no Tax deficiencies relating to the Acquired Assets or
the Seller's Business have been assessed or, to the Knowledge of the Seller,
proposed against the Seller and there are no pending, or to the Knowledge of the
Seller, threatened audits, investigations or claims for or relating to any
liability in respect of Taxes relating to the Acquired Assets or the Seller's
Business that are likely to result in an obligation by the Seller to pay any
material additional amount of Taxes;
22
(iii) no Liens with respect to or on account of Taxes have
been filed against the Seller relating to the Acquired Assets or the Seller's
Business;
(iv) none of the Seller are parties to any Tax indemnity
agreement, Tax sharing agreement, Tax allocation agreement or similar agreement
affecting or concerning the Seller's Business or the Acquired Assets; and
(v) none of the Seller has waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency that affects or concerns the Seller's Business or the
Acquired Assets.
(l) Intellectual Property.
(i) The Seller own or otherwise have the right to use pursuant
to license, sublicense, agreement, or permission all common law trade names
necessary or desirable for the operation of the Seller's Business as presently
conducted and as shall be set forth and listed on Exhibit E. Except as shall be
set forth in Exhibit E, Seller have the absolute right to assign to the Buyer
all Tradename Rights owned or licensed by the Seller and used in the operation
of the Seller's Business, without seeking the approval or consent of any other
Person. The Seller has taken all reasonable action which is necessary to
maintain and protect all Tradename Rights that it owns or uses.
(ii) Neither the Seller nor the Seller's Business has been
found to infringe, or to have interfered with, infringed upon, misappropriated,
or otherwise come into conflict with any Tradename Rights of third parties, and,
to the Knowledge of Seller, neither the Seller nor the Seller's Business has, at
any time during the last three (3) years, received any charge, complaint, claim,
demand, or notice alleging any such interference, infringement,
misappropriation, or violation (including any claim that the Seller or the
Seller's Business must license or refrain from using any Tradename Rights of any
third party). Except as shall be set forth in Exhibit E, to the Knowledge of the
Seller, no third party has interfered with, infringed upon, misappropriated, or
otherwise come into conflict with any Tradename Rights of the Seller or the
Seller's Business.
(iii) Exhibit E identifies each Tradename Right that any third
party owns and that the Seller or the Seller's Business uses pursuant to any
license, sublicense, agreement, or permission which is material to the Seller's
Business. The Seller have made available to the Buyer correct and complete
copies of all such licenses, sublicenses, agreements, and permissions (as
amended to date). With respect to each Tradename Right required to be identified
in Exhibit E, except as otherwise indicated in Exhibit E:
(A) the license, sublicense, agreement, or permission
covering the item is currently in full force and effect;
23
(B) the Seller have the absolute right to assign such
license, sublicense, agreement, or permission, and the same
will be in full force and effect on identical terms following
the consummation of the transactions contemplated hereby;
(C) none of the Seller, and to Seller' Knowledge, any
other party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach
or default or permit termination, modification, or
acceleration thereunder;
(D) none of the Seller, and to Seller' Knowledge, any
other party to the license, sublicense, agreement, or
permission has repudiated any material provision thereof;
(E) to Seller' Knowledge, with respect to each
sublicense, the representations and warranties set forth in
subsections (A) through (D) above are true and correct with
respect to the underlying license;
(F) to Seller' Knowledge, the underlying item is not
subject to any outstanding injunction, judgment, order,
decree, ruling, or charge;
(G) no action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending
or, to the Seller' Knowledge, is threatened which challenges
the legality, validity, or enforceability of the underlying
item; and
(H) none of the Seller has granted any sublicense or
similar right with respect to the license, sublicense,
agreement, or permission.
(iv) Except as shall be set forth in Exhibit E, to the
Knowledge of the Seller, the continued operation of the Seller's
Business as presently conducted will not cause the Seller or the
Seller's Business to interfere with, infringe upon, misappropriate, or
otherwise come into conflict with, any Tradename Rights of third
parties.
(m) Tangible Assets. The Seller own or lease all Personal Property,
consumables, business data and other tangible assets necessary for the conduct
of the Seller's Business as presently conducted and as presently proposed to be
conducted. Each item of such tangible assets has been maintained in accordance
with normal industry practice, is in good operating condition and repair
(subject to normal wear and tear), and is suitable for the purposes for which it
presently is used.
(n) Inventory. The Inventory included in the Acquired Assets and set
forth on the Inventory Listing shall consist of raw materials and supplies,
manufactured and purchased parts, goods in process, and finished goods, all of
which will be merchantable and fit for the purpose for which it was produced or
manufactured, and none of which Inventory are obsolete, damaged, or defective,
subject only to the reserve for inventory writedown set forth on the Most Recent
Balance Sheet, as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of the Seller and the Seller's
Business. In addition to its owned inventory, Seller is in possession of certain
Inventory not owned by such Seller ("Consignment Inventory"). This Consignment
Inventory shall be separately listed on the Inventory Listing. Buyer agrees to
assume responsibility for this Consignment Inventory in a manner consistent with
the prior practice of the Seller, as set forth in Exhibit C.
24
(o) Contracts. Seller has provided Buyer with true and complete copies
of all Contracts of the nature described in ss.1.2 of this Agreement as Accepted
Contracts.
Each Accepted Contract is currently binding upon Seller and the other parties
thereto, and is in full force and effect and (i) there are no defaults or events
that with notice, the lapse of time or both would constitute a material default
by the Seller or any other party to any of the Contracts; (ii) no other events
or conditions have occurred that would permit termination, modification, or
acceleration, under such Contract; and (iii) the Seller have not, and the other
party has not, repudiated any material provision of any such Contract.
(p) Insurance. Exhibit F sets forth the following information with
respect to each insurance policy (including all policies providing property,
casualty, liability, and workers' compensation coverage and guaranty, bond and
surety arrangements) which (i) relates in whole or in part to the Seller and
their Seller's Business, and (ii) to which the Seller or the Seller's Business
has been a party, a named insured, or otherwise the beneficiary of coverage at
any time within the past five years (collectively, the "INSURANCE POLICIES"):
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the policyholder,
and the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
To the Knowledge of the Seller: (A) each such insurance policy is in full force
and effect; (B) Neither the Seller nor the Seller's Business nor (to Seller'
Knowledge) any other party to such insurance policy is in breach or default in
any respect (including with respect to the payment of premiums or the giving of
notices), and no event has occurred which, with notice or the lapse of time,
would constitute such a breach or default, or permit termination, modification,
or acceleration, under the policy; and (C) the Seller have not, and to Seller'
Knowledge, the other party to each such policy has not, repudiated any provision
thereof. The Seller and the Seller's Business has been covered during the past
five years by insurance in scope and amount customary and reasonable for the
Seller's Business in which it has engaged during the aforementioned period.
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(q) Litigation. Neither the Seller nor the Seller's Business (i) is
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge or (ii) is a party or, is threatened to be made a party, to any action,
suit, proceeding, hearing, or investigation of, in, or before any Governmental
Body or before any arbitrator, in either case in connection with the Seller's
Business, the Acquired Assets, or the transactions contemplated by this
Agreement.
(r) Product Warranty. Each product manufactured, sold, leased, or
delivered by the Seller and the Seller's Business has been in conformity with
all applicable contractual commitments and all express and implied warranties,
and neither the Seller nor the Seller's Business has any Liability (and there is
no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement or repair thereof or other damages in
connection therewith, subject in each case only to the reserve for product
warranty claims as set forth in Exhibit G. No product manufactured, sold,
leased, or delivered by the Seller or the Seller's Business is subject to any
guaranty, warranty, or other indemnity beyond the applicable standard warranty
terms and conditions of sale or lease, apart from certain extended warranties
related to products in the ID business. The Seller shall furnish Buyer with
copies or a summary of the standard terms and conditions of sale or lease for
the Seller and the Seller's Business (containing applicable guaranty, warranty,
and indemnity provisions), including those provided for within the express terms
of any Product Sales Agreements, Dealer Agreements or Distribution Agreements
included in the Accepted Contracts. Regarding the ID business extended
warranties, Seller agrees to furnish a list of such extended ID warranties at
Closing, as set forth in Exhibit G, and the Parties agree to reasonably
cooperate in the administration of such extended warranties.
(s) Product Liability. Neither the Seller nor the Seller's Business has
any Liability (and there is no basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against
any of them giving rise to any Liability) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by the Seller or the Seller's
Business.
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(t) Employees and Labor Matters.
(i) On or before the Closing Date, the Seller shall furnish or
make available to the Buyer a list of all employees of the Seller's Business,
together with their job descriptions, rates of salary, wages or commissions,
dates of last compensation increase and the amount thereof, vacation benefits
and accrual rates, and each bonus, deferred compensation, Inventory option,
incentive compensation, severance or termination pay agreement or employment
benefit applicable to each such employee. On or before the Closing Date, the
Seller shall furnish or make available to the Buyer a list of all employee
handbooks and/or other manuals relating to the employees of the Seller's
Business, true and complete copies of which have been made available to Buyer.
(ii) No executive, supervisor, key employee, or group of
employees of the Seller's Business has given notice of any plan to terminate
employment with the Seller's Business.
(iii) All agreements and arrangements covering employees of
the Seller applicable to the Seller's Business are consistent and in compliance
with industry standards applicable to the specific country or jurisdiction in
which they operate and are employed, and none of the Seller has experienced any
strikes, grievances, claims of unfair labor practices, or other disputes in
connection with the Seller's Business for the past five (5) years. Neither the
Seller nor the Seller's Business has been determined to have committed any
unfair labor practice. The Seller have no Knowledge of any organizational effort
presently being made or threatened by or on behalf of any labor organization
with respect to employees of the Seller's Business.
(iv) The Seller are in compliance, in all respects, with all
applicable Laws relating to employment discrimination, employee welfare and
labor standards. The Seller have not received, during the three (3) year period
immediately prior to the date hereof, any written claim by any past or present
employee of the Seller that such employee was subject to a wrongful discharge or
any employment discrimination by the Seller or its management arising out of or
relating to such employee's race, sex, age, religion, national origin,
ethnicity, handicap or any other protected characteristic under applicable Law.
(v) The Seller are in compliance, in all respects, with all
applicable Laws relating to the safety of employees or the workplace or relating
to the employment of labor, including, without limitation, any provisions
thereof relating to wages, bonuses, collective bargaining, equal pay and the
payment of social security and similar payroll taxes. No proceedings are pending
before any federal, state, municipal or other court, governmental, regulatory or
administrative body or agency, or private arbitration tribunal relating to labor
or employment matters, and the Seller have not received any notice from any
governmental, regulatory or administrative body or agency of any pending
investigation by any such body or agency, or, to the Knowledge of the Seller,
threatened material claim by any such body or agency or other third party
relating to labor or employment matters or the Seller's Business.
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(vi) Seller have not violated the Worker Adjustment and
Retraining Notification Act (the "WARN Act") or any similar state or local Laws.
(u) Employee Benefits.
(i) Exhibit H lists each Employee Benefit Plan relating to the
Seller's Business that the Seller or the Seller's Business maintains or to which
the Seller or the Seller's Business contributes or has any obligation to
contribute.
(ii) There has been no prohibited transactions with respect to
any Employee Benefit Pension Plan and no fiduciary has any Liability for breach
of fiduciary duty or any other failure to act or comply in connection with the
administration or investment of the assets of such Pension Plan. No action,
suit, proceeding, hearing, or investigation with respect to the administration
or the investment of the assets of any Employee Benefit Pension Plan is pending
or, to the Knowledge of the Seller, threatened. None of the Seller's Affiliates
has any Knowledge of any basis for any Proceeding.
(iii) There are no pending actions, claims, lawsuits,
arbitrations, governmental or other Proceedings or investigations which have
been instituted or pending, or, to the Knowledge of the Seller, threatened
against any Employee Benefit Pension Plan or its assets or the trust under such
Pension Plan, or against any fiduciary of the Pension Plan with respect to the
operation of such plan (other than routine benefit claims).
(iv) The Buyer shall be legally entitled (but without
incurring any Liabilities or obligations included in Excluded Liabilities) to
establish, upon such terms and conditions as it shall reasonably require, new
Employee Welfare Benefit Plans for benefits that are required to be paid for
periods from and after the Closing under any collective bargaining agreement
included in Accepted Contracts, or otherwise that the Buyer may elect to
establish covering Hired Employees for the Seller's Business.
(v) Disclosure. The representations and warranties contained in this
ss.3 do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the representations, warranties,
statements and information contained in this ss.3 not misleading. The Seller has
no Knowledge of the existence of any Material Adverse Effect with respect to the
Seller's Business or the Acquired Assets that has not been set forth herein, in
the Exhibits, or in any information made available to the Buyer through the date
of this Agreement in connection with the transactions contemplated herein.
SELLER MAKES NO REPRESENTATIONS OR WARRANTIES, APART FROM THOSE MADE HEREIN,
REGARDING THE CONDITION OF THE INDUSTRIES, OR REGARDING THE FUTURE INCOME OR
EXPENSES.
(w) Warranties Survive Closing. The representations and warranties of
the Seller contained herein and in any document delivered pursuant to this
Agreement shall survive the Closing until December 31, 2007 (the "Warranty
Survival Period"). Any claim for indemnification by reason of breach of any of
Seller' representations and warranties under ss.8 of this Agreement made by the
Buyer in writing prior to the expiration of the Warranty Survival Period, and
the rights of indemnity with respect thereto, shall survive such expiration of
the Warranty Survival Period until resolved by the Parties, through arbitration
or otherwise judicially determined, and any such claim not so made in writing
prior to the expiration of the Warranty Survival Period shall be deemed to have
been waived.
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(x) Environmental Matters.
(i) Seller is, and at all times has been, in full compliance
with, and has not been and is not in violation of or liable under, any
Environmental, Health and Safety Laws. The Seller has no basis to expect, nor
has any of them or any other Person for whose conduct they are or may be held to
be responsible received, any actual or threatened order, notice or other
communication from (A) any Governmental Body or private citizen acting in the
public interest or (B) the current or prior owner or operator of any facilities,
of any actual or potential violation or failure to comply with any
Environmental, Health and Safety Law, or of any actual or threatened obligation
to undertake or bear the cost of any Liabilities with respect to any Facility or
other property or asset (whether real, personal or mixed) in which the Seller
has or had an interest, or with respect to any property or Facility at or to
which Hazardous Substance was generated, manufactured, refined, transferred,
imported, used or processed by the Seller or any other Person for whose conduct
they are or may be held responsible, or from which Hazardous Substances have
been transported, treated, stored, handled, transferred, disposed, recycled or
received.
(ii) There are no pending or, to the Knowledge of Seller,
threatened claims, Liens or other restrictions of any nature resulting from any
Liabilities or arising under or pursuant to any Environmental, Health and Safety
Law with respect to or affecting any Facility or any other property or asset
(whether real, personal or mixed) in which the Seller has or had an interest.
(iii) The Seller has no Knowledge of or any basis to expect,
nor has any of them, or any other Person for whose conduct they are or may be
held responsible, received, any citation, directive, inquiry, notice, order,
summons, warning or other communication that relates to any Hazardous Substance,
or any alleged, actual, or potential violation or failure to comply with any
Environmental, Health and Safety Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Liabilities with respect to any
Facility or property or asset (whether real, personal or mixed) in which the
Seller has or had an interest, or with respect to any property or Facility to
which Hazardous Substances generated, manufactured, refined, transferred,
imported, used or processed by the Seller or any other Person for whose conduct
they are or may be held responsible, have been transported, treated, stored,
handled, transferred, disposed, recycled or received.
(iv) Neither the Seller nor any other Person for whose conduct
they are or may be held responsible has any Liabilities with respect to any
Facility or, to the Knowledge of the Seller, with respect to any other property
or asset (whether real, personal or mixed) in which the Seller (or any
predecessor) has or had an interest or at any property geologically or
hydrologically adjoining any Facility or any such other property or asset.
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(v) There are no Hazardous Substances present on or in the
Environment at any Facility or at any geologically or hydrologically adjoining
property, including any Hazardous Substances contained in barrels, aboveground
or underground storage tanks, landfills, land deposits, dumps, equipment
(whether movable or fixed) or other containers, either temporary or permanent,
and deposited or located in land, water, sumps, or any other part of the
Facility or such adjoining property, or incorporated into any structure therein
or thereon. Neither Seller nor any Person for whose conduct they are or may be
held responsible, or to the Knowledge of the Seller, any other Person, has
permitted or conducted, or is aware of, any hazardous activity conducted with
respect to any Facility or any other property or assets (whether real, personal
or mixed) in which the Seller has or had an interest except in full compliance
with all applicable Environmental, Health and Safety Laws.
(vi) There has been no release or, to the Knowledge of the
Seller, threat of release, of any Hazardous Substances at or from the Facility
or at any other location where any Hazardous Substances were generated,
manufactured, refined, transferred, produced, imported, used, or processed from
or by any Facility, or from any other property or asset (whether real, personal
or mixed) in which the Seller has or had an interest, or to the Knowledge of the
Seller any geologically or hydrologically adjoining property, whether by the
Seller or any other Person.
(vii) Seller have delivered to Buyer true and complete copies
and results of any reports, studies, analyses, tests, or monitoring possessed or
initiated by Seller pertaining to Hazardous Substances in, on, or under the
facilities, or concerning compliance, by Seller or any other Person for whose
conduct it is or may be held responsible, with Environmental, Health and Safety
Laws.
(viii) The facilities do not contain any wetlands, as defined
in the Clean Water Act and regulations promulgated thereunder, or similar legal
requirements, or other especially sensitive or protected areas or species of
flora or fauna.
(y) Solvency. (i) The Seller is not insolvent and will not be
rendered insolvent by any of the contemplated transactions. As used in this
section, "insolvent" means that the sum of the debts and other probable
Liabilities of Seller exceeds the present fair saleable value of Seller's
assets.
(ii) Immediately after giving effect to the consummation of
the contemplated transactions: (i) the Seller will be able to pay their
respective Liabilities as they become due in the usual course of its business;
(ii) nor will the Seller have unreasonably small capital with which to conduct
its present or proposed business; (iii) the Seller will have assets (calculated
at fair market value) that exceed their respective Liabilities; and (iv) taking
into account all pending and threatened litigation, final judgments against the
Seller in actions for money damages are not reasonably anticipated to be
rendered at a time when, or in amounts such that, such Seller will be unable to
satisfy any such judgments promptly in accordance with their terms (taking into
account the maximum probable amount of such judgments in any such actions and
the earliest reasonable time at which such judgments might be rendered) as well
as all other obligations of such Seller. The cash available to such Seller,
after taking into account all other anticipated uses of the cash, will be
sufficient to pay all such debts and judgments promptly in accordance with their
terms.
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4. REPRESENTATIONS AND WARRANTIES OF THE BUYER.
The Buyer represents and warrants to the Seller that the statements
contained in this ss.4 are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing.
(a) Organization of the Buyer. DCS is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Delaware,
respectively, with full corporate power and authority to conduct their business
as it is now conducted.
(b) Authorization of Transaction. The Buyer has the full power and
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform its respective obligations hereunder. Without
limiting the generality of the foregoing, the Board of Directors DCS, has duly
authorized the execution and delivery of this Agreement. This Agreement
constitutes the valid and legally binding obligation of the Buyer, enforceable
in accordance with its terms and conditions, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application effecting enforcement of creditors' rights and (ii) general
principles of equity that restrict the availability of equitable remedies.
(c) Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
(including the Transfer Instruments and the Assumption Instruments referred to
in ss.2 above), will (i) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Buyer is subject or any
provision of its charter or bylaws or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which Buyer is a party or by which Buyer is bound or to which any of its
assets is subject. Buyer does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement (including the assignments and assumptions
referred to in ss.2 above).
(d) Brokers' Fees. DCS has no Liability or obligation to pay any fees
or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement for which the Seller could become liable or
obligated.
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(e) Capital Resources. At the Closing the Buyer will have sufficient
capital resources to enable it to comply with the provisions of ss.2 of this
Agreement.
(f) Warranties Survive Closing. The representations and warranties of
the Buyer contained herein and in any document delivered pursuant to this
Agreement, shall survive the Closing until December 31, 2007. Any claim for
indemnification by reason of breach of any of Buyer's representations and
warranties under ss.8 of this Agreement made by the Seller in writing prior to
the expiration of the Warranty Survival Period, and the rights of indemnity with
respect thereto, shall survive such expiration of the Warranty Survival Period
until resolved by the Parties, through arbitration or otherwise judicially
determined, and any such claim not so made in writing prior to the expiration of
the Warranty Survival Period shall be deemed to have been waived.
5. COVENANTS AND AGREEMENTS OF THE PARTIES.
The Parties do hereby mutually covenant and agree as follows:
(a) General. Each of the Parties will use its commercially reasonable
Best Efforts to take all action and to do all things necessary, proper, or
advisable in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not waiver, of the
closing conditions set forth in ss.6 below).
(b) Assignment, Benefits and Performance of Accepted Contracts. In the
event and to the extent that any Contract included in the definition of Accepted
Contracts cannot, by its stated terms or by operation of Law, be transferred or
assigned by the Seller to the Buyer at the Closing Date, the Seller does hereby
covenant and agree that each of them shall use their Best Efforts, following the
Closing Date, to assist the Buyer in obtaining the written consent of the other
Person(s) to such Accepted Contracts (including, without limitation, Purchase
Orders, Supply Agreements, License Agreements, Distribution Agreements and
Dealer Agreements) to the assignment to Buyer of all rights and benefits
thereunder from and after the Closing Date. In such connection, the Seller and
the Buyer shall jointly notify (in writing or as otherwise agreed among the
Parties) each Person who is a party to any Accepted Contract of the consummation
of the transactions contemplated by this Agreement, that Buyer has assumed the
ownership and operation of the Seller's Business and that the Buyer shall
continue to observe all Post-Closing Obligations under any and all such Accepted
Contracts. For all periods from and after the Closing Date, all benefits,
payments, rights and Claims under all such Accepted Contracts (whether consent
to transfer or assignment shall be obtained) shall be for the sole benefit of
the Buyer, and all payments, if any, received or receivable by Seller (or any of
them) in respect of any goods or services provided after the Closing Date under
an Accepted Contract shall be immediately remitted and turned over to the Buyer.
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(c) Payment of Expenses and Liabilities; Bulk Sales Laws.
Each Party agrees to pay its own costs and expenses in
connection with the transactions contemplated hereby. Any stamp or other duties
incurred in connection with the transfer of the Acquired Assets shall be borne
by the Seller. Seller will comply with the provisions of the Arizona Uniform
Commercial code - Bulk Transfers that are applicable to them in connection with
the contemplated Transaction.
(d) Covenant Not to Compete. For a period equal to three years from and
after the Closing Date, neither the Seller or the Principal Stockholder nor any
of their respective Subsidiaries or Affiliates will engage directly or
indirectly in any business, whether as owner, operator, joint venture, partner,
equity owner, or otherwise, that is in competition with the Seller's Business as
conducted as of the Closing Date in any geographic area in which such Seller's
Business is conducted as at the Closing Date; provided, that, the ownership of
less than 5% of the outstanding Inventory of any publicly traded corporation
shall not be deemed to be engaged in competition with the Seller's Business
solely by reason thereof. If the final judgment of a court of competent
jurisdiction declares that any term or provision of this ss.5(d) is invalid or
unenforceable, the Parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest to expressing the
intention of the invalid or unenforceable term or provision, and this Agreement
shall be enforceable as so modified after the expiration of the time within
which the judgment may be appealed.
(e) Employee Matters. The Buyer shall offer employment to certain or
all of the employees of the Seller's Business at the Closing, subject to the
following:
(i) Seller shall furnish to Buyer a list of all employees of
the Seller who are currently performing services for the Seller's Business,
their dates of hire, current job duties and salary or wage compensation levels.
No employee of the Seller shall be deemed to be hired by the Buyer, unless and
until each such employee shall be offered employment with the Buyer, elects to
accept employment with the Buyer, and agrees in writing to waive any claims
against Buyer for severance pay, employee benefits or other "Compensation" (as
defined in clause (ii) below) received or receivable from Seller, other than the
payment of accrued wages and other benefits resulting from his or her performing
of services for Buyer from and after the Closing Date. Subject to the foregoing
conditions, such employee shall be deemed to be a "Hired Employee" of the Buyer.
(ii) In no event shall Buyer be liable for any wages,
severance pay, vacation pay, pension, unemployment, retirement, disability,
medical or sick leave, or other benefits or obligations (collectively,
"Compensation") owed to any employee of the Seller or the Seller's Business who
is not a Hired Employee.
(iii) Nothing in this ss.5(e) shall obligate the Buyer to
continue to employ any Hired Employee for any specific period of time. For
purposes of vacation and other benefits provided by the Buyer to Hired
Employees, the Buyer shall give such employees service credit for all periods of
employment with the Seller.
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(iv) Any employee of the Seller that does not become a Hired
Employee of the Buyer may be dismissed by the Seller at any time; provided that
all Compensation obligations payable to such employee shall be the sole
Liability and responsibility of the Seller.
(f) Real Estate Lease.
Beginning on the Closing Date, the Seller or its Affiliate and
the Buyer hereby agree to execute and deliver to each other the Real Estate
Lease, pursuant to which the Seller or its Affiliate shall lease the Facility to
the Buyer, upon terms and conditions reasonably negotiated by the Parties prior
to the Closing date, and for the period specified in the Real Estate Lease, as
set forth in Exhibit A.
(g) Due Diligence.
Seller agrees to allow Buyer, at Buyer's sole expense, to conduct
whatever due diligence that Buyer requires, including right to examine
financial, accounting and business records and other legal documents affecting
the business of the Seller and generally to conduct an accounting, and legal
investigation of the Seller.
The time and requirements of the due diligence shall be accomplished in
a manner acceptable to the Seller so as to cause the least disruption to the
ongoing business activities of the Seller, but shall not be so restrictive as to
prevent the Buyer from performing its necessary due diligence.
(h) Accounts Receivable and Accounts Payable.
Unless otherwise agreed to in writing by the Parties, Buyer shall not
have any responsibility for collection of Accounts Receivable ("A/R"), nor the
payment of Accounts Payable ("A/P") related to operations prior to the Close.
However Buyer agrees to offer reasonable efforts to logistically assist Seller
in the collection and payment of these monies. Should it receive any, Buyer
agrees to remit weekly all monies to Seller relative to Seller's A/R, and to
reasonably assist Seller in accounting for these monies.
(i) PRO.
Seller is a stockholder in a professional organization called PRO. The
Parties acknowledge that Buyer, should it elect to do so, will need to make
application to PRO. Should Buyer be accepted by PRO, the PRO stock held by
Seller will be transferred to the Buyer at a price set by PRO. Transfer shall be
made to the Buyer, by Buyer making six equal monthly payments to Seller for
value of the PRO stock, as valued by PRO, beginning 30 days following the
approval of the Buyer by PRO, should such approval be granted. Unless otherwise
agreed to in writing by the Parties, any dividends received from PRO, continuing
until ninety days following receipt by Seller of the full purchase price from
Buyer for such shares of PRO held by Seller, shall belong to the Seller. The
Seller makes no representation to the Buyer that PRO will accept the Buyer as a
new member, but Seller will use its best efforts to facilitate Buyer's
acceptance by PRO. Should PRO elect not to accept Buyer, Seller shall be free to
sell its stock to PRO.
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(j) Adjustments at Closing.
At Closing Parties agree to make reasonable adjustments for
work-in-progress, deposits, and lay-a-way, and for such other issues as the
Parties may reasonably agree to address.
(k) Best Efforts. The Parties shall use their best efforts to cause the
conditions in Article 6 to be satisfied.
6. CONDITIONS TO OBLIGATIONS.
(a) Conditions to Obligations of the Buyer. The obligations of the
Buyer to consummate the transactions to be performed by it in connection with
the Closing, including the payments of the Purchase price in accordance with
ss.2 above, is subject to satisfaction, or waiver by the Buyer, of the following
conditions:
(i) All of Seller' representations and warranties in this
Agreement (considered collectively), and each of these representatives and
warranties (considered individually), shall have been accurate in all material
respects as of the date of this Agreement, and shall be accurate in all material
respects as of the time of the Closing as if then made;
(ii) The Seller shall have performed and complied with all of
their respective covenants and obligations hereunder in all material respects
through the Closing;
(iii) The Seller shall have obtained all required approvals
and consents;
(iv) there shall not be in effect any injunction, judgment,
order, decree, ruling or charge of any Governmental Body or any arbitrator which
(A) prohibits consummation of any of the transactions contemplated by this
Agreement, or (B) materially and adversely affects the right of the Buyer to own
the Acquired Assets, to operate the Seller's Business, and to control the
Seller's Business;
(v) the absence of any Material Adverse Effect since the date
of this Agreement;
(vi) The Seller and its applicable Affiliate shall have each
duly executed and delivered this Agreement and Real Estate Lease to the Buyer;
and
(vii) all other actions required to be taken by the Seller in
connection with consummation of the transactions contemplated hereby and all
material agreements, instruments, and other documents (other than the Exhibits
hereto) as are required to effect the transactions contemplated hereby will have
been executed and delivered in form and substance reasonably satisfactory to the
Buyer.
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The Buyer may waive any condition specified in this ss.6(a),
either in writing prior to Closing or if the transactions contemplated hereby
shall be consummated at the Closing.
(b) Conditions to Obligations of the Seller. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction, or waiver by the Seller, of the
following conditions:
(i) All of Buyer's representations and warranties in this
Agreement (considered collectively), and each of these representatives and
warranties (considered individually), shall have been accurate in all material
respects as of the date of this Agreement, and shall be accurate in all material
respects as of the time of the Closing as if then made;
(ii) the Buyer shall have paid the Purchase Price and shall
have performed and complied with all of its other covenants hereunder in all
material respects through the Closing;
(iii) there shall not be in effect any injunction, judgment,
order, decree, ruling or charge of any court or quasi-judicial or administrative
agency of any federal, state, local or foreign jurisdiction or any arbitrator
which prohibits consummation of any of the transactions contemplated by this
Agreement;
(iv) the Seller shall have received the consent and approval
of this Agreement and the transactions contemplated hereby;
(v) all actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby, including payment and
delivery of the Purchase Price and all other material documents (other than the
Exhibits hereto) required to effect the transactions contemplated hereby will
have been executed and delivered in form and substance reasonably satisfactory
to the Seller.
The Seller may waive any condition specified in this ss.6(b), either in writing
prior to Closing or by consummation of the transactions contemplated hereby at
the Closing.
7. TERMINATION.
(a) Termination of Agreement. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Buyer and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing; and
36
(ii) any Party may terminate this Agreement by giving written
notice to the other Parties if the Closing shall not have occurred by
June 5, 2006, and such termination shall be without liability, apart
from the $50,000 deposit referenced herein.
(b) Effect of Termination. If any Party terminates this Agreement
pursuant to ss.7(a) above, all rights and obligations of the Parties hereunder
shall terminate without any Liability of any Party to any other Party, apart
from the $50,000 deposit referenced herein.
8. INDEMNIFICATION
(a) Indemnification Provisions for Benefit of DCS, and/or their
nominee.
(i) In the event that the Seller or the Stockholders breaches
(or in the event any third party alleges facts that, if true, would mean that
the Seller or the Stockholders have breached) any of their representations and
warranties contained in this Agreement, for the duration of the applicable
Warranty Survival Period set forth in ss.3(w) above, provided that the Buyer
makes a timely written claim for indemnification against the Seller and the
Stockholders pursuant to ss.8(c) below within such Warranty Survival Period,
then the Seller and the Stockholders shall (subject to the provisions of this
Agreement) jointly and severally indemnify the Buyer from and against the
entirety of any and all Liabilities, judgments, claims, demands, losses, costs
or expenses, including the costs of defense, settlement and reasonable
attorneys' fees (collectively, "Adverse Consequences") which the Buyer may incur
or suffer through and after the date of the claim for indemnification (including
any Adverse Consequences the Buyer may suffer after the end of any applicable
Warranty Survival Period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach (or the alleged breach) of such
representations or warranties of the Seller or the Stockholders.
Notwithstanding the foregoing, the Seller shall only be liable to indemnify the
Buyer pursuant to this ss.8(a)(i),
(A) if and to the extent the aggregate amount of all Adverse
Consequences which the Buyer may suffer or incur shall exceed twenty-five
thousand ($25,000) in the aggregate (the "Seller' Indemnity Basket") , and
(B) for any such Adverse Consequences which the Buyer may
suffer or incur in excess of the Seller' Indemnity Basket and up to a maximum
amount equal to the amount of the aggregate Purchase Price previously paid to
the Seller under this Agreement (the "Seller's Indemnity Cap").
This indemnification shall only extend for so long as the statute of limitations
on any underlying claim.
(ii) In addition to (and not in lieu of) the indemnification
provisions of ss.8(a)(i) above, the Seller and the Stockholders shall jointly
and severally indemnify the Buyer from and against the entirety of any Adverse
Consequences which the Buyer may suffer resulting from, arising out of, relating
to, in the nature of, or caused by:
37
(A) any Liability of the Seller or the Seller's Business
which is an Excluded Liability (including any Liability that is not an Assumed
Liability but becomes a Liability of the Buyer under any applicable Law of any
jurisdiction, under any common law doctrine of de facto merger or successor
liability, under Environmental, Health, and Safety Laws, or otherwise by
operation of law);
(B) any breach or failure to perform any of the covenants
and agreements on the part of the Seller to be performed under this Agreement or
any Transfer Instrument; or
(C) to the extent not an Assumed Liability, any Liability of
the Seller or the Seller's Business for unpaid Taxes with respect to any Tax
year or portion thereof ending on or before the Closing Date (or for any Tax
year beginning before and ending after the Closing Date) to the extent allocable
to the portion of such period beginning before and ending on the Closing Date;
such allocation being made by closing the books of the relevant taxpayer as of
the Closing or if the Closing represented the end of a Tax Year.
The indemnification provisions of this ss.8(a)(ii) shall survive the
Closing and the Closing Date indefinitely, and shall not be subject to the
Seller's Indemnity Basket or Seller's Indemnity Cap.
(b) Indemnification Provisions for Benefit of the Seller and
Stockholders.
(i) In the event the Buyer breaches (or in the event any third
party alleges facts that, if true, would mean the Buyer has breached) any of its
representations and warranties contained in this Agreement, for the duration of
the applicable Warranty Survival Period set forth in ss.4(f) above, provided
that the Seller or the Stockholders make a timely written claim for
indemnification against the Buyer pursuant to ss.8(c) below within such Warranty
Survival Period, then DCS shall indemnify the Seller from and against the
entirety of any Adverse Consequences the Seller or the Stockholders may suffer
through and after the date of the claim for indemnification (including any
Adverse Consequences the Seller or Stockholders may suffer after the end of any
applicable Warranty Survival Period) resulting from, arising out of, relating
to, in the nature of, or caused by the breach (or the alleged breach) of any of
the Buyer's or DCS' representations and warranties.
Notwithstanding the foregoing, the Buyer shall only be liable to make indemnify
the Seller pursuant to this ss.8(b)(i),
(A) if and to the extent the Adverse Consequences which the
Seller or the Stockholders may suffer or incur shall exceed Twenty-Five Thousand
Dollars ($25,000) in the aggregate (the "BUYER'S INDEMNITY BASKET") , and
38
(B) for any such Adverse Consequences which the Seller or
the Stockholders may suffer or incur in excess of the Buyer's Indemnity Basket
and up to a maximum amount equal to the amount of the aggregate Purchase Price
under this Agreement (the "Buyer's Indemnity Cap").
This indemnification shall only extend for so long as the statute of limitations
on any underlying claim.
(c) Matters Involving Third Parties.
(i) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter in respect of a Claim by such
third party (a "Third Party Claim") which may give rise to a Claim for
indemnification against any other Party (the "Indemnifying Party") under this
ss.8, then the Indemnified Party shall promptly notify each Indemnifying Party
thereof in writing with respect to such potential Adverse Consequences;
provided, however, that no delay on the part of the Indemnified Party in
notifying any Indemnifying Party shall relieve the Indemnifying Party from any
obligation hereunder unless (and then solely to the extent) the Indemnifying
Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the Indemnifying
Party notifies the Indemnified Party in writing within thirty (30) days after
the Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party from and against the
entirety of any Adverse Consequences the Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by the Third
Party Claim, and (B) the Indemnifying Party conducts the defense of the Third
Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with ss.8(c)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and expense
and participate in the defense of the Third Party Claim, and the Indemnifying
Party shall have no liabilities or obligations in respect of the costs and
expenses of such counsel, (B) the Indemnified Party will not consent to the
entry of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnifying Party (not to
be withheld or delayed unreasonably), and (C) the Indemnifying Party will not
consent to the entry of any judgment or enter into any settlement with respect
to the Third Party Claim without the prior written consent of the Indemnified
Party (not to be withheld or delayed unreasonably), unless an unconditional term
of such judgment or settlement is a complete release of all Liability of the
Indemnified Party.
39
(iv) Notwithstanding the foregoing, if an Indemnified Party
determines in good faith that there is a reasonable probability that an adverse
judgment with respect to the Third Party Claim may adversely affect it or its
Affiliates other than as a result of monetary damages for which it would be
entitled to indemnification under this Agreement, or if the Indemnifying Party
does not, within thirty (30) days after the Indemnified Party's notice is given,
give notice to the Indemnifying Party of its intention to assume the defense
thereof, such Indemnified Party may, by notice to the Indemnifying Party, assume
the exclusive right to conduct the defense of such Third Party Claim, but the
Indemnifying Party shall not bound by (i) any compromise or settlement thereof
unless the Indemnifying Party has given its prior written consent thereto or
(ii) any determination of any such defense of such third Party Claim.
(d) Limitation on Liability. This ss.8 shall represent the sole and
exclusive remedy for each of the Parties for the breach of any representation,
warranty, covenant or agreement of the Parties in this Agreement.
(e) Consequential and Other Damages. No Party hereto will be liable to
any other Parties for indirect, incidental, consequential, punitive or special
damages including, but not limited to, lost profits arising from or relating to
any breach of this Agreement, regardless of any notice of the possibility of
such damages.
9. RESOLUTION OF DISPUTES, BINDING ARBITRATION.
(a) In the event of any dispute with respect to or pursuant to this
Agreement, including but not limited to (i) any dispute or Claim in respect of
any Adverse Consequences, Third Party Claims or otherwise for which the Buyer
shall seek indemnification under this Agreement, the Disclosure Schedule hereto
or any other Transfer Instrument or Assumption Instrument, and (ii) any dispute
or Claim for which the Seller, or any of them, shall seek indemnification under
this Agreement, the Disclosure Schedule or any other Transfer Instrument or
Assumption Instrument, the Parties shall in good faith seek to settle or
compromise such dispute or Claim. In the event that any such dispute or Claim
cannot be settled or compromised, as aforesaid, within thirty (30) days of the
other Party's receipt of written notice of the subject Claim, any Party may
promptly thereafter submit the dispute for final and binding arbitration before
a three-person panel of arbitrators who shall be appointed in accordance with
the then prevailing Rules of Arbitration of the American Arbitration Association
(the "AAA Rules") (the "Arbitration"). In the event that it may reasonably be
assumed that a dispute or Claim shall not be settled or compromised, as
aforesaid, or in the event that it may not reasonably be expected that the
claiming Party wait thirty (30) days before submitted the dispute to
Arbitration, then a dispute or Claim may be submitted as foresaid immediately.
Any such Arbitration shall be held in accordance with the AAA Rules and shall be
conducted in Phoenix, AZ. The panel of arbitrators shall be selected within
sixty (60) days of submission of such dispute to Arbitration. The Parties shall
use their collective Best Efforts to promptly schedule and conduct the hearings
before such arbitrators, with a view toward concluding such arbitration
proceedings not later than ninety (90) days from the first submission of the
dispute to arbitration.
(b) In connection with any Arbitration pursuant to this ss.9, the
arbitrators shall, as part of their award, allocate the fee of the Arbitration,
including all fees of the arbitrators, the cost of any transcripts, and the
parties' reasonable attorneys' fees, based upon and taking into account the
arbitrators' determination of the merits and good faith of the parties' claims
and defenses in the subject proceeding.
40
(c) The decision and award of the arbitrators shall be final and
binding upon the parties hereto and shall be enforceable in any court of
competent jurisdiction, including any court in Phoenix, Arizona. Any process or
other papers hereunder may be served by registered or certified mail, return
receipt requested, or by personal service, provided that a reasonable time for
appearance or response is allowed.
10. MISCELLANEOUS.
(a) Press Releases and Public Announcements. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its Best Efforts to advise the other Party prior to
making the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents referred
to herein), the Transfer Instruments, the Assumption Agreement and the
Disclosure Schedule, constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations by or
between the Parties, written or oral, to the extent they related in any way to
the subject matter hereof and thereof.
(d) Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other Party; provided, however, that the Buyer may (i) assign all of its
rights and interests hereunder to one or more of its Affiliates and (ii)
designate one or more of its Affiliates to perform its obligations hereunder; in
any or all of which cases the Buyer nonetheless shall remain responsible for the
performance of all of its obligations hereunder, unless the Buyer shall provide
the Seller with assurances reasonably satisfactory to Seller that such assignee
will be able to satisfy any and all of Buyer's obligations under this Agreement.
Notwithstanding the foregoing, the Buyer shall not assign all or any substantial
portion of the Acquired Assets to any Affiliate unless it simultaneously assigns
all or substantially all of the Assumed Liabilities to such Affiliate.
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
41
(f) Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then three
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Buyer:
Digital Card Systems, Inc.:
0 Xxxxxxxxxx Xxxx Xxxx
Xxxxx, XXXX 00000
Attn; Xxxxxxx Benz, CEO
Tel: (000) 000-0000
Fax: (000) 000-0000
With respect to communications to DCS a copy to:
Xxxxxxx X. XxXxxx, Esq.
Xxxxx & Xxx Xxxxxx LLP
0 Xxxx Xxxxxx, 00xx Xxx.
Xxx Xxxx, XX 00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Stockholders or the Seller: Chairman & Chief Executive Officer
Xxxxxx Photo Properties, Inc.
0000 Xxxx XxXxxxxx Xxxx
Xxxxxxx, XX 000000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Email: xxxxxxxxx@xxxxx.xxx
-------------------
Copies to:
Xxxxxx Xxxxxx home address:
0000 Xxxx Xxxxxxxx Xx.
Xxxxxxx, XX 00000
Home Telephone: (000) 000-0000
Attorney for Seller:
Xxxxx Xxxxxx, P.C.
0000 Xxxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
42
Any Party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no such notice,
request, demand, claim, or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Any
Party may change the address to which notices, requests, demands, claims, and
other communications hereunder are to be delivered by giving the other Party
notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Arizona without giving effect to any
choice or conflict of law provision or rule that would cause the application of
the laws of any jurisdiction other than the State of Arizona.
(i) Amendments and Waivers. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Buyer and the Seller. No waiver by any Party of any default, misrepresentation,
or breach of warranty or covenant hereunder, whether intentional or not, shall
be deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
43
(k) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
(l) Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
(m) Specific Performance. Each of the Parties acknowledges and agrees
that the other Party would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Party shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
state or federal court sitting in the State of Arizona having jurisdiction over
the Parties and the matter, in addition to any other remedy to which it may be
entitled, at law or in equity.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
44
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on
the date first above written.
BUYER
DIGITAL CARD SYSTEMS, INC.
By: /s/ Xxxxxxx Benz
--------------------
Name: Xxxxxxx Benz, Chairman and CEO date
SELLER
XXXXXX PHOTO PROPERTIES, INC.
BY: /S/ Xxxxxx Xxxxxx
---------------------
Name: Xxxxxx Xxxxxx, Chairman and CEO date
PRINCIPAL STOCKHOLDER:
/S/ XXXXXX XXXXXX
-----------------
XXXXXX XXXXXX date
STOCKHOLDERS:
/S/ XXXXXXXX XXXXXX
-------------------
XXXXXXXX XXXXXX date
/S/ XXXXXXXX XXXXXX
-------------------
XXXXXX FAMILY TRUST date
/S/ XXXX XXXXXX
---------------
XXXX XXXXXX date
/S/ XXXX XXXXXX
---------------
XXXX XXXXXX date
45
EXHIBIT A
REAL ESTATE LEASE
46
EXHIBIT B
XXXXXX EMPLOYMENT AGREEMENT
47
EXHIBIT C
CONSIGNMENT AGREEMENTS
1) CONDITIONS RELATIVE TO INVENTORY OVER ONE YEAR OLD OWNED BY
SELLER
2) CONDITIONS RELATIVE TO INVENTORY OWNED BY THIRD PARTIES
48
EXHIBIT D
LIABILITIES TO BE ASSUMED
49
EXHIBIT E
TRADENAMES
OTHER DISCLOSURES RELATIVE TO TRADENAME RIGHTS
50
EXHIBIT F
INSURANCE POLICIES
51
EXHIBIT G
PRODUCT WARRANTY
52
EXHIBIT H
EMPLOYEE BENEFITS
53
EXHIBIT I
ALLOCATION
RELATED TO IRS FORM 8594, UNDER SECTION 1060
1) CLASS IV ASSETS (FMV INVENTORY)
INVENTORY PAYMENT PRICE $
2) CLASS V ASSETS (FMV CAPITAL EQUIPMENT) $ 491,000
3) CLASS VI ASSETS (INTANGIBLES) $ 100,000
54
EXHIBIT J
OTHER DISCLOSURES
55
EXHIBIT K
CAPITAL EQUIPMENT
56
